-
AboutUpholding the guiding ideology of using the association as a platform, centering on member units, and taking industry development as our responsibility, we fully leverage the initiative of the association to create a fair, transparent, and efficient industry organization led by the enterprises.
-
NewsUpholding the guiding ideology of using the association as a platform, centering on member units, and taking industry development as our responsibility, we fully leverage the initiative of the association to create a fair, transparent, and efficient industry organization led by the enterprises.
-
ResearchUpholding the guiding ideology of using the association as a platform, centering on member units, and taking industry development as our responsibility, we fully leverage the initiative of the association to create a fair, transparent, and efficient industry organization led by the enterprises.
-
EventsUpholding the guiding ideology of using the association as a platform, centering on member units, and taking industry development as our responsibility, we fully leverage the initiative of the association to create a fair, transparent, and efficient industry organization led by the enterprises.
-
MembersUpholding the guiding ideology of using the association as a platform, centering on member units, and taking industry development as our responsibility, we fully leverage the initiative of the association to create a fair, transparent, and efficient industry organization led by the enterprises.
Precious metal investment technical analysis theory
Release time:
26 May,2015
This article mainly discusses Elliott Wave Theory and Dow Theory in the technical analysis theory of precious metal investment
Elliott Wave Theory
Elliott Wave theorists categorize price movements into specific wave patterns. These patterns can indicate future trends and reversals. Waves that move in the same direction as the trend are called impulse waves, while waves that move against the trend are called corrective waves. Elliott Wave Theory divides impulse and corrective waves into five and three main movements, respectively. These eight movements make up a complete wave cycle. The time span can range from 15 minutes to several decades.
The challenging part of Elliott Wave Theory is that one wave cycle can be composed of eight sub-wave cycles, which can be further divided into impulse and corrective waves. Therefore, the key to Elliott Wave Theory is to identify the context of a specific wave. Elliott Wave theorists also use Fibonacci retracements to predict the peaks and troughs of future wave cycles.
Like any technical analysis tool, wave theory needs to be validated with other analytical tools. For example, analyzing fundamentals to determine the long-term trend and its potential duration. In the gold market, based on our experience, wave theory is more effective in applying to long-term trends than short-term trends. We basically believe that using wave theory to analyze short-term trends, such as hourly chart cycles, is not very meaningful.
Dow Theory
Dow Theory is mainly applied to the stock market, but like other technical analysis theories, it can be applied to various investment markets after appropriate adjustments according to the characteristics of different markets.
According to Dow Theory, stock price movements have three trends. The most important is the primary trend, which refers to the broad or overall rise or fall of stock prices. This movement usually lasts for one year or more, and the total rise (fall) in stock prices exceeds 20%. For investors, a sustained upward primary trend forms a bull market, while a sustained downward trend forms a bear market.
The second trend of stock price movement is called the secondary trend. Because the secondary trend often moves in the opposite direction of the primary trend and exerts a certain restraining effect on it, it is also called the corrective trend. This trend lasts from 3 weeks to several months, and the rise or fall in stock prices is generally 1/3 or 2/3 of the primary trend. The third trend of stock price movement is called the short-term trend, which reflects the changes in stock prices within a few days. Corrective trends are usually composed of three or more short-term trends.
Among the three trends, long-term investors are most concerned about the primary trend. Their goal is to buy stocks as much as possible in a bull market and sell them in time before a bear market forms. Speculators are more interested in the secondary trend. Their goal is to obtain short-term profits. The short-term trend is less important and easily manipulated, so it is not suitable for trend analysis. People generally cannot manipulate the primary and secondary trends; only the national financial department can make limited adjustments.
Primary Trend:
This refers to the upward and downward movements from a broad perspective. As long as the next upward level exceeds the previous high point, and each secondary decline has a bottom higher than the previous decline, then the main trend is upward. This is called a bull market. Conversely, when each secondary decline brings the price to a lower level, and the subsequent rebound cannot bring the price to the high point of the previous rebound, the main trend is downward, which is called a bear market. Usually (at least theoretically, this is the subject of discussion), the primary trend is the only goal considered by long-term investors among the three trends. Their approach is to buy stocks as early as possible in a bull market, as long as they can determine that the bull market has started, and hold them until they determine that a bear market has formed. They will ignore all secondary declines and short-term fluctuations in the overall trend. Of course, for those who make frequent trades, secondary movements are very important opportunities.
Secondary Trend:
It is a counter-trend movement in the opposite direction of the primary trend, interfering with the primary trend. In a bull market, it is a secondary decline or "correction"; in a bear market, it is a secondary rise or rebound. Usually, in a bull market, it will fall by one-third to two-thirds of the primary trend's rise. However, it should be noted that the one-third to two-thirds principle is not immutable. It is simply a probabilistic statement. Most secondary trends fluctuate within this range. Most of them stop very close to the halfway point, retracing 50% of the previous main rise. Retractions that do not reach one-third are rare, and some almost completely erase the previous gains. Therefore, we have two criteria for judging a secondary trend: any movement in the opposite direction of the primary trend usually lasts at least three weeks; retracing 1/3 of the primary trend's rise. However, besides this criterion, secondary trends are usually unclear. Its confirmation, correct evaluation of its development, and determination of its entire process are always a difficult problem in theoretical descriptions.
Short-term Fluctuations
These are short-lived fluctuations. They rarely exceed three weeks and usually last less than six days. Although they are meaningless in themselves, they add a mysterious and changeable color to the entire development process of the primary trend. Usually, whether it is a secondary trend or a section of the primary trend between two secondary trends, it is composed of a series of three or more distinguishable short-term fluctuations. Inferences drawn from these short-term changes can easily lead to the wrong direction. In a stock market, regardless of its maturity, short-term fluctuations are the only ones that can be "manipulated." The primary and secondary trends cannot be manipulated.
The three trends of stock market fluctuations mentioned above are extremely similar to the fluctuations of ocean waves. In the stock market, the primary trend is like the entire process of each rise (fall) of the tide. Among them, the bull market is like the rising tide, with one wave after another continuously surging to hit the shore until it finally reaches the highest point indicated. Then it gradually recedes. The gradually receding ebb tide can be compared to the bear market. During the rising tide, each subsequent wave rises more than the previous one, and recedes less than the previous one, thus gradually raising the water level. During the receding tide, each subsequent wave is lower than the previous one, and the subsequent wave cannot recover the height reached by the previous wave. These waves during the rising (receding) tide are like secondary trends. Similarly, the surface of the water is covered with ripples, which are comparable to the short-term fluctuations in the market; they are unimportant daily fluctuations. Tides, waves, and ripples represent the primary trend, secondary trend, and short-term fluctuations of the market.
Key words:
Related Content
Service Hotline:+86-17695938506
E-mail：info@cpmic.org
Address: B329, Block B, Longyuan Cultural and Creative Building,
Sihui East, Chaoyang District, Beijing
Thank Jinchuan Group, Northam Platinum, Anglo American, and other image contributors for their significant support in the construction of the website.