author index stock type gallery - Most people attempting trading

Prices move in Trends: Dow suggested that prices have a tendency to move consistently in the same direction for long lengths of time. These he expressed as author index stock type gallery. We are all aware of what trends are we often talk about them as being either bullish or bearish trends. When markets are moving aimlessly, they can be said to be random but if there is a certain consistency in the direction of price movements, then we say that they are trended.

Trends were classified by way of Direction -Up, Down or Sideways or by Time Long Medium and Short. While the classification by direction is more generic, the classification by time is taken to be more specific. They were given specific names and extent. Hence the long term was called Primary Trend and was expected to last more than one year. The medium term was called the Intermediate Trend and was expected last from between 3 weeks and up to 3 months while the short term was called the Minor Trend and was expected to last up to 3 weeks. Dow defined a trend as a sequence of Higher Tops and Higher bottoms. In other words, prices have to move in such a fashion that every rises will exceed the previous peak while subsequent declines will hold above the previous declines. The logic of this is very sound. Unless people are willing to pay a greater premium the prices cannot rise further. And people will pay a higher premium only when they perceive that there are even higher prices down the line.. A higher bottom would form when the people are in a hurry to buy thereby preventing the stock prices to trade down to where they had been earlier. This also suggests that there is a change in the perception about what the stock is worth. The exact reverse happens when the stock is showing a sequence of lower tops and bottoms.

Trends have phases: By giving a greater emphasis on the different aspects of a trend, Dow chose to draw a clearer picture of what is happening within the markets. Essentially, any trend has three phases:

A phase of accumulation where the insiders buy up the stock and begin sponsoring a new rise. Accumulation is often characterized by quieter price movements but a closer look would reveal that higher tops and bottoms would be recorded at a minor level as insiders begin to absorb all the stocks on offer.

The phase of accumulation is then followed by a phase of Rapid Advance. This happens when the broader market becomes aware that there is something new happening in the stock and begins to participate. Maximum price moves occur in this phase.

This is then followed by a phase of Distribution. Once the price targets are achieved, the stocks are then sold off to the maximum number of people, thereby exiting the positions built up earlier during accumulation. Many times distribution occurs over a period of time and may be part of the last rise as well as the first fall.

Volume must expand in the direction of the main trend : Addressing the second variable within the market, Dow stated what to most would seem obvious that every directional move in the market must be accompanied by volumes. By making it a rule Dow ensured that we would have a definitive way of checking for true and false up and down moves. One would have to make comparative studies between two legs of advances (or declines) on the volume patterns that they exhibit. Depending upon what is seen, one can then draw a conclusion that either the market is moving ahead with volumes accompanying advances or not. A rising market trend can only persist if there are more and more people willing to invest in that direction. So a rise which does not have volumes is suspect and liable for reversal.

Averages must confirm: Dow made this as a safety tenet. By stating that the sequence of higher tops and bottoms should be seen in more than one average (industrials as well as rails) he was just ensuring that the uptrend that one is supposing has a stronger foundation. The basis of conclusion was that what was evident across a wider canvas has a lesser probability of becoming wrong.

Reversal Signals: Dow stated that a author index stock type gallery is in existence until there is an evidence of its reversal. This may seem a bit circular but in reality, it is very clear what Dow is attempting here. He is giving us a clear rule which prevents us from becoming subjective about the markets. This tenet says to us that until there is a new sequence of lower tops and bottoms, the earlier sequence of higher tops and bottoms should be deemed to be in existence. This way we will be prevented from taking an improper trend consideration.