Dow Jones

The father of technical analysis, was born in Sterling, Connecticut, on November 6, 1851 and was a farmer’s Son that was orphaned at age 6. He was a journalist during his entire adult life; his first job was obtained in 1872 in the journal “The Springfield Daily Republican” Springflied City in Massachusetts, covering events in their city. Dow remained in this newspaper until 1875. At that time, he moved to Rhode Island, Providence and began working on “Providence Star, where he was night editor until the newspaper disappeared in 1877, and Dow was the” Providence Journal “until 1879. He published his first 5 major articles, through which he became famous local historian on the local steamboat or the domestic life of the neighborhood. In 1879, at the request of his newspaper, he visited Leadville in Colorado, to cover the news of the discovery of some carbonates. By that time mining town of Leadville was the most famous of the country. Dow was there that became known financiers in the country and where he found that financial journalism was more attractive and could be more useful in this area, as ordinary journalist. During that time conducted extensive reports regarding the financial aspects of the mining boom.

In 1880 he moved to New York and met Wall Street stock market and get a job as a reporter specialist in mining company shares. He soon became a respected and renowned experts reporter capable of performing financial analysis. Even I get to handle a large amount of confidential information. In late 1880, Dow went to work to “Kiernan News Agency where he met his colleague and friend Edward D. Jones, who incidentally turned out to be his follower before they met. In November 1882, Dow Jones and Kieran left and formed Dow Jones & Company Inc. remained there until January 1899, finally died in Providence in 1920. Dow and Jones picked up the news and moved to the messengers of financial companies. Every evening both prepared the following day’s news. Initially the office was located right next to the building of the New York Stock Exchange. In 1884 the company had grown in size considerably, and they began to distribute the news themselves. At that time, hunters were generalizing the news, specialist writers and “scroungers” who shared the news. Each employee of the company requesting subscriptions to news service and is being paid a commission for each sale they performed. Finally, each employee reported the news to which he had access, regardless of their work and sales made in 1883 as the company began to print a brochure based daily news. This was the forerunner of what is now the Wall Street Journal, the most important business newspaper in the world.

The Dow Jones Theory

These small filter particular phenomena that affect the prices, clean and leave the market trend. Moving averages are the most basic and effective indicators used by the technical analysis. It is simply the average of a set of values (prices, volumes, etc …) on a specific number of data (sessions) that mark the period. From using mean we get to track market trends, eliminating the “noise” and getting an image smoothed prices. In the foreign exchange market often uses various kinds of averages: exponential weighted and simple. Its greatest usefulness is displayed when the market is trending. Not only from the signals that show the crossing of half the price, or average crosses between different sessions, but also as areas of support / resistance dynamic are updated with prices.

Markets are moved by three trends: primary (more than a year), Secondary (lasting months) and the minor trend. This principle is of great importance in diagnosing the daily trading market before, and obviously at the time of market entry. We speak of dominance, or the beginning of the mainstream. This point gives us a frame of reference in the operation from:

Two indices are required to confirm a trend change upwards or downwards. A movement in only one of the means by itself does not confirm a change in the current trend. As a rule of thumb, we can say that the most points has a stronger trend line is the same. Various combinations are used. Since the use of a single average, showing signs of buying and selling from the crossing with the price, until the use of various media, where the signal of market entry would be given by the lower average crossover with the greatest. Applying the Fibonacci numbers, we can use the AME 5-13-21 crossing where the crossing of EMA 5 sessions with the 13 we would signal entry and confirm the signal when it crosses the 21 EMA. Be considered a trend in effect until there is no confirmation of change: sometimes a lateral move or a small correction does not advance at all, a change in trend. In practice and from the use of Japanese Candlesticks, we can apply the following criteria: a trend is broken when you can confirm his split with an opening of candle below / above the trend line.

If the market is up the volume will increase in the rise and fall in price declines. Conversely if the trend is down, the volume will be higher in downhill and then reduced the increases. I.e. the volume accompanying the trend.

The Dow Theory, one uses the closing prices, regardless of the highs or lows of the session.

Until the two indices are not confirmed, it is considered that the old trend remains in force, despite the apparent signs of turnaround. This principle seeks to avoid premature changes of position. These principles are in full force today, as we have said all technical and chartist analysis is mainly based on the Dow Theory. Today the Dow Jones industrial average, which brings together the 30 largest companies in the United States is the world’s best known index and has even created the equivalent in Europe: the Dow Jones Eurostoxx 50, which brings together 50 European companies large-caps.