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

The definition of an uptrend is: a price pattern making a series ofhigher lows and higher highs.

As I said in the last chapter, trading stocks in strong uptrends is where you and I will spend most of our time. Swing traders target the two-to-five day breakouts in a stock that is beginning a hardy uptrend. Position traders scan for stocks breaking out of a Stage One base, then buy and hold for the duration of the uptrend, possibly four to six weeks.

When viewed on daily or weekly charts, moving averages are at best a secondary indicator when assessing the overall trend strength of a security. For the intraday charting used in day trading, the oscillators we will discuss next are better at showing moving average divergence.

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.