Foreign exchange traders are divided into technical analysis and fundamental analysis. The former is based on "all-inclusive price", which holds that all market information will eventually be expressed in the form of price, so as long as we analyze the law of price change, we can make a directional judgment on the future market trend.

Many traders try to rely on all kinds of trading data to accurately guess the price trend, thinking that since the price is all-inclusive, it will certainly be able to predict future changes. Actually, it is not. It is precisely because the price is all-inclusive, so all trading activities should follow the price rather than exceed it. In actual transactions, only by "following the trend" can we truly abide by the principle of "all-inclusive price".

2. Determination and division of trends

Dow theory divides trends into three categories according to different cycles: major trends, minor trends and short-term trends. The main trend is that the price of a certain variety changes greatly in a relatively long period of time, and the overall trend is upward or downward. The secondary trend represents the revision of the main trend and the adjustment form of the main trend. Short-term trends usually last for a short time, and their speculative reference value is the lowest relative to big trends and small trends.

When investors participate in the market, they must be clear about the essence of "trend". The trend is not static. There are different forms of expression in different time periods. To grasp the trend, we must combine our own trading cycle and follow the trend.

3. Three stages of Dow Theory bull market.

Dow theory divides bull market into three stages: doubt stage, optimism stage and fanaticism stage. In the stage of doubt, the market is characterized by market delay and price fluctuation. At this time, the main funds are gradually opening positions, and smart traders will try to stop losses lightly or keep calm and wait and see.

In the final stage of the market, the energy will be fully released, the market atmosphere will be extremely active, and ordinary traders will run into the market, chasing up and down. Market participants usually choose to leave at this stage, and smart traders should also be alert to the danger of greed from ordinary people, so as to reduce their positions or leave at a profit. Clearly and skillfully identifying the development process of bull market is a necessary condition for successful trading.

4. Three stages of bear market in Dow's theory.

Dow theory divides the bear market into three stages: disappointment stage, pessimism stage and despair stage. In the disappointment stage, the market shows the gradual contraction of energy, and the market peaks near the market high point. At this point, if traders are among them, they should immediately stop taking profits or gradually reduce their positions to minimize losses.

With the loss of key positions, the bull-bear watershed appeared and the market entered a pessimistic stage. At this time, there are fewer and fewer new funds, and more and more positions are closed, so that the continuation of the original trend of the market is completely exhausted and there is a reversal pattern. At this time, traders should not panic. After the pessimistic stage, there will generally be a correction of the secondary trend or a horizontal consolidation movement. Traders can take this opportunity to leave and escape to prevent further quilt cover.

Finally, the market fell again and entered a desperate period. In the desperate stage, most ordinary traders choose to lighten their positions and stop losses, and the market is crying.

5. Mutual verification of indicators

Judging the trend of a market depends on the analysis of various technical indicators. Many traders misunderstand this and think that as long as they are two different indicators, they can verify each other. In fact, two technical indicators with the same principle verify each other, and the conclusion is not credible.

Theory is dead, while market and people are alive. The Dow theory, which has been passed down for more than a hundred years, should be treated flexibly in the modern foreign exchange market, and the core of it should be observed and grasped with the eyes of the times. Only in this way can our transaction be qualitatively improved.