Can the "Dow Theory" Predict the Market Reversals?

Summary

This video script discusses the evolution of trading as a career, noting the challenges of market volatility and the unpredictability of returns. It emphasizes the importance of long-term investment in quality stocks, citing examples of significant returns from companies like Bajaj Finance and NTPC. The script introduces Dow Theory, explaining uptrends, downtrends, and sideways trends to identify market direction. It simplifies the theory into an 'one-two-three' pattern for recognizing trend reversals, advocating for a disciplined approach to trading with risk management and backtesting strategies before live implementation.

Takeaways

• 😀 Full-time trading is no longer recommended by experienced traders due to the changing market dimensions and frequent rule changes.
• 🤔 Diversifying investments in good stocks for the long run can yield significant returns, as demonstrated by examples like B, Oil India, and NTPC.
• 📈 Dow Theory, proposed by Charles Dow, is a fundamental concept for understanding market trends, including uptrends, downtrends, and sideways trends.
• 🔄 In an uptrend, prices make higher highs and higher lows; in a downtrend, they make lower highs and lower lows; and in a sideways trend, prices oscillate around similar levels.
• 🚗 The script uses the analogy of a car's indicators to explain that a single sign (like a lower high in an uptrend) is not enough to confirm a trend reversal.
• 📊 The 'one-two-three' pattern is a method to identify the end of an uptrend or the beginning of a downtrend, involving specific formations of highs and lows.
• 🛑 A single lower high or lower low is not sufficient to declare the end of an uptrend; it requires a sequence of patterns for confirmation.
• ✅ The 'one-two-three' pattern for uptrend termination includes a lower high, a lower low, and a break of the lower low level.
• ↗️ Conversely, the end of a downtrend can be identified by a higher low, a higher high, and a break above the higher high level.
• 💡 Dow Theory is not only applicable to long-term investment strategies but can also be used in lower time frames, though it may introduce noise that requires careful risk management.
• 💰 Risk management is crucial; traders should not risk more than 2-3% of their capital per trade and should trail their stop-loss orders to lock in profits.

Q & A

Why do many experienced traders no longer recommend full-time trading as a career option?

The market dimensions have changed significantly, with frequent rule changes making it difficult to generate consistent good returns. A single bad day can wipe out an entire capital, which makes full-time trading risky.

What alternative approach to trading is suggested in the script for those who wish to earn good returns on their capital?

Investing in good stocks for the long run while continuing with a day job or business is suggested. The script provides examples of companies like B, Oil India, and NTPC that have generated significant returns since 2023.

What is the basic premise of Dow Theory as explained in the script?

Dow Theory, proposed by Charles Dow, suggests that price can move in three trends: uptrend, downtrend, and sideways trend. The theory is used to study these variations and understand market behavior.

How does the script define an uptrend in the context of Dow Theory?

An uptrend is defined by the price making higher lows and higher highs successively, indicating an overall upward movement in price.

What does the script suggest for identifying the end of an uptrend?

The script suggests using a 'one-two-three' pattern: 1) the price makes a lower high, 2) it then makes a lower low, and 3) finally, it breaks the lower low level, indicating the end of the uptrend.

How can one identify the beginning of an uptrend or the end of a downtrend according to the script?

The script recommends looking for a 'one-two-three' pattern in reverse for a downtrend: 1) the price makes a higher low, 2) it then makes a higher high, and 3) it breaks above the higher high, signaling the end of the downtrend and potentially the start of an uptrend.

What is the significance of the 'one-two-three' pattern in trading according to the script?

The 'one-two-three' pattern is a key tool for identifying trend reversals. It provides a systematic approach to recognize when an uptrend or downtrend might be ending, allowing traders to make informed decisions about entering or exiting trades.

Why is it important to backtest trading strategies before implementing them in a live market?

Backtesting provides traders with confidence and conviction in their strategies by allowing them to see how the strategy would have performed historically. It helps in understanding the strategy's effectiveness and potential risks before real money is involved.

What is the recommended risk management strategy when using Dow Theory for long-term investments?

The script suggests not risking more than 2 to 3% of one's capital per trade. Additionally, it recommends trailing the stop loss below the low of every swing low as the trade moves in a profitable direction.

How can Dow Theory be applied to different time frames in trading?

Dow Theory can be used in lower time frames, but it's more beneficial for long-term investments on daily and weekly charts. When used in lower time frames, traders should have a mechanism for risk management to deal with market noise.

What is the role of common sense in applying Dow Theory to trading?

Common sense plays a crucial role in interpreting the signals given by Dow Theory. It helps traders to not jump to conclusions based on a single signal but to look for a series of confirming signs before making trading decisions.

Outlines

00:00

📊 Changing Perceptions in Stock Trading Careers

The script begins by discussing the shift in the trading industry where full-time trading is no longer recommended by experienced traders due to volatile market conditions and frequent regulatory changes. It emphasizes the importance of long-term investment in quality stocks for steady returns, citing examples of companies like B, Oil India, and NTPC that have shown significant returns since 2023. The speaker introduces the concept of Dow Theory, proposed by Charles Dow, to understand market trends and suggests that this theory can be simplified for anyone to pick good stocks for long-term investment.

05:00

📈 Understanding Market Trends with Dow Theory

This paragraph explains the basics of Dow Theory, which identifies three types of market trends: uptrend, downtrend, and sideways trend. It describes how to identify these trends by observing the price movements and making higher highs and lows in an uptrend, lower highs and lows in a downtrend, and similar highs and lows in a sideways trend. The speaker uses examples from Titan and Bajaj Finance to illustrate uptrend patterns and Nifty and AD Enterprises for downtrend patterns, emphasizing the importance of recognizing these patterns for effective trading decisions.

10:02

🚗 Applying Common Sense to Market Indicators

The speaker compares market indicators to driving behaviors, suggesting that just like a car's turn signal doesn't always predict the exact direction, a single lower high or low in a price trend doesn't necessarily indicate a trend reversal. The paragraph introduces the 'one-two-three' pattern as a method to identify the end of an uptrend, which includes a lower high, a lower low, and a break below the previous low. This pattern is illustrated with examples from Tata Steel and Sun Pharma, highlighting the importance of not assuming a trend change based on a single indicator.

15:04

📉 Identifying the End of Downtrend for Entry Points

Continuing the explanation of the 'one-two-three' pattern, this paragraph focuses on identifying the end of a downtrend, which can signal a potential entry point for a new uptrend. The pattern involves a higher low, a higher high, and a breakout above the previous high. Examples from ACC and JSW Steel are used to demonstrate this pattern, showing how these formations can indicate a potential reversal of the market trend and provide opportunities for traders to enter the market.

20:05

🚀 Dow Theory for Long-Term Trading and Risk Management

The speaker discusses the applicability of Dow Theory for long-term trading and investment, emphasizing its value in understanding market behavior on daily and weekly charts. They stress the importance of risk management, suggesting that traders should not risk more than 2-3% of their capital per trade. The paragraph also touches on the concept of trailing stop losses to secure profits and the necessity of backtesting trading strategies to gain confidence before implementing them in live markets.

25:06

📝 The Importance of Backtesting Trading Strategies

In the final paragraph, the speaker underscores the critical role of backtesting trading strategies against historical data to build confidence and conviction in a trading system. They mention that without backtesting, traders may lack the necessary assurance to follow a strategy consistently, especially when faced with market noise and unpredictable movements. The paragraph concludes with a reminder to backtest strategies on at least 100 charts to ensure a solid foundation before live trading.

Keywords

💡Full-time trading

Full-time trading refers to the act of trading financial instruments such as stocks, commodities, or currencies as a primary occupation. In the video's context, it is mentioned that while it was once a dream for many, experienced traders no longer recommend it as a career due to the volatile and unpredictable nature of the market, which can make consistent returns challenging.

💡Market Dimensions

Market Dimensions in the script likely refers to the various aspects and characteristics of the market, including its size, liquidity, volatility, and the range of instruments available for trading. The script suggests that these dimensions have changed significantly, leading to a more complex and challenging trading environment.

💡Dow Theory

Dow Theory is a technical analysis method developed by Charles Dow, which posits that price movements follow certain patterns or trends. The video explains the theory in a simplified manner, emphasizing its utility in identifying uptrends, downtrends, and sideways trends in the market.

💡Uptrend

An uptrend is a term used to describe a period during which the price of a financial instrument is generally rising. The script illustrates this with the concept of 'higher high' and 'higher low,' indicating that each new peak and trough is higher than the last, suggesting a bullish market sentiment.

💡Downtrend

A downtrend is the opposite of an uptrend, where the price of a financial instrument is generally falling. The script describes it by the pattern of 'lower high' and 'lower low,' indicating a bearish market sentiment and a series of lower peaks and troughs.

💡Sideways Trend

A sideways trend, also known as a consolidation or range-bound market, occurs when the price of a financial instrument moves within a relatively narrow range, not showing a clear upward or downward direction. The script uses this term to describe a market where prices make similar highs and lows.

💡Swing High/Low

Swing high and swing low are terms used in technical analysis to identify significant turning points in price movements. In the script, they are used to define the start of a trend and to track whether the market is moving in an uptrend, downtrend, or sideways trend by comparing each new high or low to the previous one.

💡Risk Management

Risk management in the context of the script refers to the strategies and practices used by traders to minimize potential losses and protect their capital. It includes setting stop-loss orders and ensuring that the potential loss on any single trade does not exceed a small percentage of the total capital.

💡Stop-Loss

A stop-loss is an order placed with a broker to sell a security when it reaches a certain price. It is designed to limit an investor's loss on a position and is a critical component of risk management. The script emphasizes setting stop-loss orders below the low of the starting swing low in the context of Dow Theory.

💡Backtesting

Backtesting is the process of evaluating a trading strategy using historical data to see how it would have performed in the past. The script encourages traders to backtest their strategies on at least 100 charts to gain confidence and conviction in their trading approach before implementing it in live markets.

💡Long-term Investment

Long-term investment refers to the strategy of holding onto assets for an extended period, often years, to benefit from potential growth and compounding returns. The script suggests using Dow Theory on daily and weekly charts for long-term trading and investment, emphasizing the importance of patience and holding stocks through market fluctuations.

Highlights

Quitting a day job to trade full-time is no longer recommended by experienced traders due to the volatile nature of the market.

Market dimensions have significantly changed, with frequent rule alterations making it difficult to generate consistent monthly returns.

A single market spike can potentially erase an investor's entire capital, emphasizing the risks of full-time trading.

Investing in good stocks for the long term while maintaining a day job or business is suggested as a safer approach.

Examples of significant returns from B, Oil India, and NTPC since 2023 demonstrate the potential of long-term stock investments.

Diversifying capital in stocks like B, Oil India, and NTPC can mitigate the risks associated with market volatility.

The video aims to simplify the complex Dow Theory for long-term stock investment selection.

Dow Theory, proposed by Charles Dow, is explained through the lens of uptrend, downtrend, and sideways trend analysis.

In an uptrend, the price movement is characterized by a series of higher lows and higher highs.

Holding stocks that display an uptrend pattern can lead to significant profits as the price may rise substantially.

The one-two-three pattern is introduced as a method to identify the end of an uptrend for exiting trades.

A single lower high or low is not sufficient to conclude the end of an uptrend; a series of patterns is necessary.

The end of an uptrend is confirmed by a break below the lower low level in the one-two-three pattern.

Similarly, the end of a downtrend is identified by a higher low, higher high, and a break above the higher high level.

Dow Theory can be applied to various time frames, but its insights are particularly valuable for long-term investment strategies.

Risk management is crucial when using Dow Theory, especially when trading in lower time frames to avoid market noise.

Backtesting trading strategies is essential for gaining confidence and conviction before implementing them in live markets.

The importance of not risking more than 2-3% of capital per trade is emphasized for financial safety.

Trailing stop-loss orders are recommended for safe traders to capture the entire move of a trend.

Conservative traders can use trailing stop losses to exit trades closer to the top of a trend.

Transcripts

a few years back quitting the day job

and trading full-time was the dream of

many youngstar but now ask all the

experienced Traders none of them suggest

full-time trading as a career option

because Market Dimensions has changed a

lot there are changes in rules very

frequently difficult to generate good

returns every month and one Spike on a

bad day can wipe out your entire C

Capital does it mean everybody should

quit the stock market need not be one

can continue with their day job or

business and also earn good Returns on

their Capital if they invest in good

stocks for the long run look at some of

these examples B has generated 224 per

returns since

2023 oil India has generated 196 %

return since

2023 ntpc has generated 110% return

since

2023 if you diversify your capital on

similar stocks like this you don't have

to worry about spikes Big Falls cap up

or gap down open on daily charts level

then how to find good stocks for the

long-term investment in this video I

will break down a complex Theory into a

simple modules and anybody can

understand how to pick good stocks for

the long-term investment so without

wasting much time let's

[Music]

start friends take any Market cash

Market or commodity Market or Forex

market price can move in upside

direction or downside direction or

sideways direction right any Market can

should move in any one of these

Direction

from these three Direction any Market

will not go in any other direction right

now the thing is let's say it's going

upside the thing is price will not go

upside in a single straight line right

it will give small pullback and go up

small pull back and then go up it give

small pull back and go up while going

down also it give a small bounce and

then it goes down it give a small bounce

and then goes down right so we can study

all these variations using doubt Theory

okay this is very simpler and effective

manner to study these variations using

doubt Theory so dou the is proposed by

Charles da basically he wrote series of

articles in his journal Wall Street

Journal and explain doubt theory in many

articles in this video I'm trying to

explain the entire doubt theory in

simpler and effective manner as much as

possible so according to Charles da

price can move in three Trends you know

uptrend downtrend and sideways Trend now

let's study one by one in detail okay so

number one is uptrend let's say the

price has started its movement from here

so this is the swing low and this is the

swing high this is the starting swing

low and this is the starting swing high

right now when price starts moving okay

it makes an High higher low okay as

compared to the previous swing low the

original swing low it makes an higher

low right then it makes an higher high

as compared to the previous uh the

starting swing High it makes an higher

high right so in an uptrend price keeps

on making higher low higher high higher

low higher I higher low higher I so in

another words when the price keeps on

making higher high and higher low we can

say that the price is in a uptrend now

let's say you are holding some stocks in

your portfolio if one of the stock is

displaying this pattern it indicates it

is in a uptrend and you should try to or

you should aim to carry that particular

stock because you never know where the

price will go right so starting from 100

it can go to 1,000 to 2,000 3,000 so

there is a possibility so until price

displays this characteristics higher low

higher high higher low higher high You

can conclude that that particular stock

is in in an strong uptrend and you

should try to write the profits as much

as possible okay now this is an example

of uptrend in Titan monthly chart okay

let's say this is the starting point and

this is the starting swing low and this

is the starting swing high right now

compared to the starting swing low this

is a higher low right then compared to

the starting swing high this is a higher

high right see price kept on making

higher low higher high higher low higher

high higher low higher high which means

it is in a strong uptrend if you are

holding this stock means you should try

to write the profits as much as possible

okay so this is an one example so one

more example is baj finance weekly chart

okay so this is also in an strong

uptrend now see compared to the starting

swing low it kept on making higher low

higher high higher low higher high

higher low higher high right so it is in

a strong uptrend once again if you have

any you know these kind of stocks in

your portfolio which are displaying

higher low higher high formation

you should try to hold that particular

strock and try to write the profits as

much as possible now downtrend okay I of

up trend is clear right higher low

higher I higher low higher high higher

low higher high now downtrend so in

downtrend what happens is let's say this

is the starting point just for

explanation sake now this is the swing

high right and this is the swing low in

downtrend what happens is compared to

the previous swing High it makes an

lower high right this is a lower high

now compared to the previous swing low

it makes a lower low okay lower it made

a lower high it made a lower low so in

downtrend price keeps on making lower

high lower low lower high lower low in

another words if the price is making

lower high and lower low we can conclude

that it is in a downtrend

now let's say you have a stock in your

portfolio which is displaying this

particular pattern lower high lower low

lower high lower low formation do you

think is it a good idea to hold the

stock comment below let's see whether

you understood the concept or not there

is a stock in your portfolio it

displaying lower high lower low lower

high lower low pattern and is it a good

idea to hold this particular stock in

your portfolio just comment below let's

see whether you understood this or not

now I will take an example so this is

Nifty weekly chart so this is the you

can see right compared to the previous

swing High it made a lower high lower

low lower high lower low lower high and

lower low right so it is a perfect

example of our downtrend this is one

more example ad Enterprises weekly chart

again compared to the starting swing

High it is a lower high again compared

to the starting low uh swing low it is a

lower low right it kept on making lower

high lower low lower high lower low so

it is in a strong downtrend right now

high up downtrend is also clear uptrend

higher low higher high higher low higher

high downtrend lower high lower low

lower high lower low now in Side West

Trend this is the third Trend ins Side

West Trend what happens is price you

know this is a high this is a low what

happens is price will keep on making the

same highs same lows same highs and same

lows okay now don't assume you know or

don't think that it should make the

proper swing High same high same for

example if the th000 is the high don't

assume exactly at th000 it will turn

back okay small very little deviation is

okay so because in Market is there is no

100% accurate right so but just an

example approximately if it going like

this then it is in a sideways Trend so

this is an example for a sideways Trend

chart so in vrl it is in a sideways

Trend in the this particular time period

right it kept on making similar highs

and similar lows this is perfect example

for a sideways Trend chart now let's say

you are driving a car in a road one car

is driving or going ahead of you and the

right indicator is on in that particular

car now do you think that car will take

you turn only think for a

moment now the thing is is if the if

there is a car going ahead of you if the

right indicator is on the car can take

uter there is a possibility there is no

doubt about it but one more possibility

is car can take right turn also right

you know there is second possibility now

there is a third possibility car can go

straight as well because some stupid

drivers have less consciousness about

their indicators they will switch on the

right indicator they will drive straight

they will switch on the left indicator

they will keep on driving straight right

there is a possibility actually now we

should apply this Common Sense how do

you see for example when I'm driving a

car if the indicator is on no straight

away we we unconsciously we do this so

even if the indicator is on straight

away we don't assume he will take a

U-turn right or he will take a right

turn we will see whether that know wheel

is turning whether the body of the car

is turning in the direction if the body

is turning in the direction it gives a

confirmation that definitely he will

take a either right turn or U-turn right

so that's what we do as a experienced

drivers so we should know take the

essence or lesson from this experience

we should try to apply in price chart as

well now when the price is in a strong

uptrend if the price makes it this is

uptrend chart chart right when the price

makes

lower high this is a previous Wing high

this is a lower high so when the price

makes a lower high don't assume never

ever assume price will begin with a

downtrend recall the car example it can

take down uturn which means it can go

downtrend it can take right turn which

means it can go into sideways mode the

price can get into sideways mode or it

can go straight as well so there is a

possibility of price going straight as

well in an uptrend so the formation of

one lower high is not sufficient enough

to declare end of uptrend I will repeat

once again friends the formation of one

lower high or one lower low is not

sufficient enough to declare the uptrend

is over then this is an example this you

know don't trust my words I always say

this uh don't trust or believe whatever

ever I'm going to say because you always

back test the concept you verify that

concept on a chart then only you can

believe it right so this is an example

see the in this particular mode the

price is in a strong uptrend do you

agree with this this is one part and now

it made an lower high right it made a

lower high but still it's a proper lower

high right and still price went upside

right so this is the perfect example of

what I'm going to explain okay what I

explained in the previous slide now your

question is then Indra you are saying I

know lower higher low higher high higher

lower low formation is a formation of

uptrend characteristics of a uptrend

then how do you identify the end of

uptrend let's say I wanted to exit my

stock at the top then how do I you know

identify end end of uptrend friends one

honest admission nobody can exit uh you

know at the top let's say a stock went

from 100 to, rupees nobody can exit at,

rupees okay this is very true actually

so only two people can exit at the top

know one is God another one is liar so

nobody can exit at, but we should try to

identify a close point which is very

close to the top actually so in the

previous slide I saw one lower I

formation is not sufficient for the exit

now you have a confusion right then how

do we identify a close point which is is

very close to the uh top actually now it

is using uh simple concept one 2 three

pattern how to identify end of uptrend

let's say you have a a lot of stocks in

your portfolio how do you identify end

of uptrend for those particular stocks

whether to carry it or not the pattern

is very simple friends it is one two

three pattern okay let's say the price

is in a strong uptrend number one

pattern is it makes a lower high

formation the price is in a strong

uptrend it makes a lower high formation

that is number one second pattern is it

makes a lower low formation second

pattern is it makes a lower low

formation third pattern is price breaks

the lower low level okay when the price

breaks the lower low level you can

conclude that it is end of uptrend okay

I'll repeat once again friends and the

price is in a strong uptrend first it

should form a lower high formation it is

an indication like an right turn

indicator in a car so it is a warning

symbol definitely we should be conscious

and careful about it formation of lower

low which means tire is also turning

towards you know that side

second warning third warning is break of

lower which means car completely turned

this side so this indicates uptrend is

over right this is a common sense we

should apply the same Common Sense via 1

two three pattern to exit our stocks at

the up in an up I mean when the uptrend

is over actually okay so again don't

believe my words you can see yourself in

the chart this is an example of Tata

steel daily chart okay the price is in a

strong uptrend do you agree with this

now price made a lower high right

pattern one formation price made lower

high next price made lower low okay

price made lower low right it is very

clear price made a lower low pattern two

next price broke that level right price

break the lower low level right so that

is pattern three completion okay so this

indicates uptrend is over so if you are

carrying any stocks if the stocks

displayed this one two 3 pattern lower

high formation lower low formation and

price also broke the lower low indicates

end of uptrend you should close that

particular stock as much as possible

because you never know when the price I

mean how much fall the stock will

witness so it it indicates the One 2

three pattern formation lower high lower

low and break of that level indicates

something is going in wrong with that

particular stock you have to exit If You

observe the chart very carefully after

the break of that level the same level

acted as resistance two three times

right so that level is very very crucial

okay this is end of uptrend see when you

see a danger you should always exit Okay

so if you can't see a danger after some

time you can always above that

particular stock right you can always

buy back but once you see the end of

uptrend it is better better better to

exit that particular stock so this is

one more example sunfa again it is a

weekly chart see here from here to here

the price is in a strong uptrend do you

agree with this next at the top it made

lower high number one pattern it made

lower high next it made lower low number

second pattern it made lower low right

Next price broke that level pattern

three formation right price broke that

level so it indicates end of uptrend so

if you're carrying any stock which

displayed this particular pattern means

you need to close the trade again here

you know it acted as a resistance once

the price broke that level right now you

can say Indra end of uptrend

identification is good uh we have

learned it but to exit at the end of

uptrend we should be already in trade

rate you should always should already

carrying some stocks to exit at the top

end of up right then how to identify

those stocks or how to identify end of

downtrend so that you participate in

that particular stock and you

participate in the rally and to write

the profits once again the logic is very

simple friends the same one two three

pattern but on the mirror side okay I'll

explain in a simple manner let's assume

a particular stock is in a downtrend

first it should make higher low first it

should make higher low this is this

completes pattern one formation next it

should make higher high this is pattern

two it should make higher high then the

price should break the higher high this

conf forms pattern three so first

pattern higher low formation this is a

warning symbol which means something is

going wrong second is higher ey

formation it indicates it it is

confirmation three is breaking so the

break of higher high indicates it is

going upside right so this indicates end

of downtrend so downtrend is over or you

can also conclude it is the beginning of

uptrend once the price display this

particular characteristics you can take

an entry so this is an example of a ACC

weekly chart you can see here the price

is in a strong downtrend right so it is

in a downtrend here it made you know

higher low so this is pattern one

formation it made higher high R this is

pattern two formation once the price

broke that level this is pattern three

formation right which indicates end of

downtrend or the beginning of uptrend so

entry your entry should come when the

price breaks and closes above the higher

high level that should be your entry

point and your stop loss should be the

starting swing low okay that should be

your starting swing low now you might

think or you know you might get a doubt

in your mind that the stop- loss is very

wide in this particular case it happens

friends dou here is especially designed

for in investment to hold your stocks

for more duration if you have the

mindset capability to hold your stocks

for more than 6 months or one year then

only you should use dou theory in Daily

charts or in weekly charts okay so your

entry should come at or above the higher

high level when the price breaks above

the higher high your entry should come

and when the your stop loss should be

below the low of the starting swing low

okay this is one thing we'll see one

more example this is jsw steel daily

chart so this is in a strong downtrend

right again see here the price made a

higher low right the price made a higher

low pattern one

formation next it made a higher high

formation right this is pattern two it

made a higher high this is pattern two

next price broke that level and the

price broke that level it indicates end

of downtrend are the beginning of

uptrend okay again you see here it acted

as a strong support there is a big

bullish engulfing candle which came at

the same level right so that level

becomes automatically very very crucial

so your entry should come above the high

higher high okay your entry should come

above whenever the candle closes above

the higher your entry should come and

your stop loss will be below the swing

low okay this is very simple this is a

rule actually now the simple conclusion

is see friends Dow Theory you can also

use Dow theory in lower time frames but

it give valuable insights to market

trends Behavior how the price is going

whether the price is going upside or

downside or sideways if the price is

making higher high higher low higher

high higher low means it is in a strong

uptrend if the price is making lower

high lower low lower high lower low

means it is in a strong downtrend if it

is making same high same low same high

same low means it is it is in a know

sideways Trend now you can also uh I

mean this D here is highly beneficial

for investment and long-term trading on

daily charts and weekly charts but you

can also use this in lower time frames

as well but you take any strategy

whenever you get into your lower time

frame there is a high possibility of

noise right so you should have a

mechanism and risk management money

management in place to beat that noise

that is very important so next you know

always don't more than 2 to 3% of your

Capital per trade okay what it means is

uh let's say you take a entry at the

break of higher high and your stop loss

is at the low of the Swing Low now if

the price comes back and takes your

stop- loss means you should not lose

more than 2 to 3% friends if you have 1

lakh rupees of capital if that happens

you should not lose more than 2 to 3%

that is the uh important Point that's

very very important actually now once

you take the position if you know it is

better to tral your stop- loss below

theow of every swing low for example

let's say you taken a trade uh earlier

your stop loss will be the low of the

starting swingler right price starts you

know moving upside with higher low

higher high higher low higher high right

then it is makes sense to trial your

stop loss below the low of every swing

low uh why because you know there are

two options safe traders who want to

write the entire move they can follow

the end of uptrend concept the one 12

three pattern formation to exit the

trade very conservative Traders you know

who want to exit at very safe point then

they can follow you know they can trial

their stop losses below the low of every

swing low in that way they can exit very

close to the top next always back test

the ideas before implementing in live

market so I always say this let's say

you have understood one trading concept

that doesn't mean that you know it is uh

went into your head and you know you

will be able to take trades based on

that particular strategy 100% why

because our mind is very complex system

actually it has a lot of ideas when you

don't back test a particular trading

strategy you don't get 100% conviction

and confidence in that particular system

so once you take a trade if there is a

you know some random movement your mind

will generat lots of IDE ideas hence you

will get a lot of confusion whether to

you know follow that particular strategy

or not in live market but in offline

Market when you back test a strategy

against at least minimum bare minimum

100 charts you will get you know little

confidence and conviction to use that

particular system

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