Under condition of an international financial crisis this is very important to understand how it works. Where are the roots of this crisis? How had this happened? What to expect next? And mostly important how to make use of it?

Phase I: Capital Inflows and Real Exchange Rate Appreciation

Theory

Technical analysis has posed a challenge to economic analysis in its ability to predict exchange rates. As a result, considerable research has been undertaken by the economic community on how technical analysis works, both in practice and in theory. It is not for here to go through this research or literature in detail. Rather, we look at one such study as symptomatic of a general inquiry by the economics profession into the workings of technical analysis.

Dow Theory

Dow never actually wrote his observations down in one manuscript, so the principles of Dow theory gathered together here have come from several different locations, not from one comprehensive source. You will find different interpretations of what Dow theory is. Here, though, are the six key principles in what I believe to be the most convenient grouping of Dow's thoughts.

1. The market indexes cover the whole market and discount all market information.
2. Markets have three time horizons for trends: primary, secondary, and tertiary.

TWO EMOTIONS THAT RULE THE MARKETS

Two polar opposites reign side by side over the world's financial markets: greed and fear. Faster and faster, this ruling duo passes the scepter back and forth, inciting the volatility we witness-and participate in-each day.