Ilmu Saham | ISX Stock Market Resource Center

Trading with Dow Theory (The Truth about Technical Analysis)

Posted in Trading System, Tutorial by ilmusaham on August 4, 2008

PART I.

Dear all,

Bagi kebanyakan orang dow theory cuman dianggap sebagai sebuah teori hapalan saja yang tidak berguna.

Bagi para pengguna teknikal analisis sebetulanya dow theory ini adalah dasar dari ilmu teknikal analisis ini.
Dengan memahami dow theory akan didapatkan pemahaman menyeluruh dari teknikal analisis.
Pada masa ini orang kebanyakan langsung diberi pengajaran tentang Teknikal Indikator. Yang harus dipahami adalah Teknikal Indikator adalah sebagian kecil dari Teknikal analisis. masih banyak metode2 teknikal analisis seperti Dow Theory, elliot Wave, Gann, Fractal, Chaos, EMH, volume analysis, market comitment, etc

Masalah utama yang terjadi adalah karena kebanyakan orang mempelajari ilmu teknikal analisis dalam suatu bentuk yang terpecah-pecah dan tidak lengkap maka tercipta suatu kesimpulan lain bahwa antara berbagai teknik2 teknikal analisis diatas adalah berbeda juga.

Banyak pertanyaan sederhana seperti misalnya
1. Candlestick : Ada hampir 500 formasi candlestick tapi yang mana yang efektif dipakai??
Jawab: Untuk bisa menggunakan candlestick dalam trading tidak semata-mata menghapal pola candlestick dan melakukan intrepretasi masing-masing tapi deipelrukan pemahaman tentang market comitment dan asal terbentuknya harga. Sehingga mampu memahami konsep terbentuknya pola candlestick dan bukan pola apa yang terjadi saat ini.
2. Moving Average: Mengapa penggunaan periode moving average masing2 orang berbeda?
Jawab: Perlu diketahui dulu bagaimana cara kalkulasi moving average dan bagai mana mengimplemetasikan analisa menggunakan moving average untuk trading dsbnya berdasarkan 8 rules of moving average. Yang terpenting rules penggunaan indikatornya dulu yang jelas, bukan masalah periode yang berbeda-beda.

“All about trading is all about life”

The 1st Step of Technical Analysis (Dow Theory)


Dow Theory is a heterodox theory on stock price movements that is used as the basis for technical analysis. The theory was derived from 255 Wall Street Journal editorials written by Charles H. Dow (1851–1902), journalist, founder and first editor of the Wall Street Journal and co-founder of Dow Jones and Company. Following Dow‘s death, William P. Hamilton, Robert Rhea and E. George Schaefer organized and collectively represented “Dow Theory,” based on Dow‘s editorials. Dow himself never used the term “Dow Theory,” nor presented it as a trading system.

There are 5 basic tenets of Dow Theory
1. The market has three movements
2. Trends have three phases
3. The stock market discounts all news
4. Stock market averages must confirm each other
5. Trends are confirmed by volume

Note:
Dow theory ditemukan oleh Charles dow, beliau merupakan seorang jurnalis yang melakukan pengamatan terhadi market. Pengamatan beliau disimpulkan dalam dua bentuk index yaitu Dow jones Industrial dan Dow Jones Transportation.
Salah satu kesimpulan sederhana yang dikemukakan beliau adalah untuk melihat pertumbuhan dari dunia industri pabrikasi kita bisa melakukan analisis terhadap industri laiinya misal dari sisi transportasinya.

Karena berangkat dari asumsi bahwa jika keuntungan di industri transportasi meningkat maka secara tidak langsung menunjukan juga bahwa produksi dari industri pabrikasi meningkat dan permintaan dari konsumen meningkat pula yang pada akhirnya dapat mendorong pada pertumbuhan laba masing-masing perusahaan. Secara global hal ini dapat digunakan untuk mengukur tingkat perekonomian suatu negara.

1. The market has three movements

(1) The “main movement”, primary movement or major trend may last from less than a year to several years. It can be bullish or bearish. (2) The “medium swing”, secondary reaction or intermediate reaction may last from ten days to three months and generally retraces from 33% to 66% of the primary price change since the previous medium swing or start of the main movement. (3) The “short swing” or minor movement varies with opinion from hours to a month or more. The three movements may be simultaneous, for instance, a daily minor movement in a bearish secondary reaction in a bullish primary movement.

Penjelasan dari teory ini cukup sederhana yaitu bahwa market mempunyai tiga tipe trend yaitu:
1. Major Trend merupakan trend jangka panjang dari suatu market biasanya ditentukan dalam kurun waktu minimal 1 tahun


Note: Pergerakan harga 4 tahun terakhir

2. Medium trend merupakan analisa trend untuk jangka menengah biasanya antara 2 minggu sampai 3 bulan

Note: Pergerakan harga 12 bulan terakhir

3. minor trend merupakan analisa short trend biasanya untuk kurun waktu daily.


Note: Pergerakan harga 3 bulan terakhir

Kesimpulan globalnya adalah Major trend terbentuk karena adanya gerakan2 dalam medium trend dan minor trend.

Dalam konsep wave analysis biasanya disebutkan bahwa wave yang besar terbentuk karena adanya wave2 yang kecil.

Untuk aplikasinya bisa dengan mengunakan peak and through analysis, tapi sebaiknya kita selesaikan pembahasan tentang semua dow theory dulu baru masuk ke peak and through analysis

PART II.

2. Trends have three phases

Dow Theory asserts that major market trends are composed of three phases: an accumulation phase, a public participation phase, and a distribution phase. The accumulation phase (phase 1) is a period when investors “in the know” are actively buying (selling) stock against the general opinion of the market. During this phase, the stock price does not change much because these investors are in the minority absorbing (releasing) stock that the market at large is supplying (demanding). Eventually, the market catches on to these astute investors and a rapid price change occurs (phase 2). This occurs when trend followers and other technically oriented investors participate. This phase continues until rampant speculation occurs. At this point, the astute investors begin to distribute their holdings to the market (phase 3).

Note:
Ada 3 fase pergerakan dalam harga yaitu
1. Akumulasi harga


2. Partisipasi (bullish/bearish)


3. Distribusi harga (bisa berupa contuniation trend atau reversal trend)


Penerusan bullish trend biasa disebut Excess Phase, penerusan bearish trend biasa disebut panic phases

PART III.

3. The stock market discounts all news

Stock prices quickly incorporate new information as soon as it becomes available. Once news is released, stock prices will change to reflect this new information. On this point, Dow Theory agrees with one of the premises of the efficient market hypothesis.

The idea that the market discounts everything is not new to technical traders, as this is a major premise of many of the tools used in this field of study. Accordingly, in technical analysis one need only look at price movements, and not at other factors such as the balance sheet

Like mainstream technical analysis, Dow theory is mainly focused on price. However, the two differ in that Dow theory is concerned with the movements of the broad markets, rather than specific securities.

For example, a follower of Dow theory will look at the price movement of the major market indexes. Once they have an idea of the prevailing trend in the market, they will make an investment decision. If the prevailing trend is upward, it follows that an investor would buy individual stocks trading at a fair valuation. This is where a broad understanding of the fundamental factors that affect a company can be helpful.

It’s important to note that while Dow theory itself is focused on price movements and index trends, implementation can also incorporate elements of fundamental analysis, including value- and fundamental-oriented strategies.

Note:
Menurut Dow harga yang terjadi saat ini sebenernya sudah merefleksikan kejadian di market saat ini juga. Yang paling penting menurut dow adalah bukan apa yang bisa menyebabkan harga bergerak saat ini tapi reaksi apa yang mungkin terjadi terhadap pergerakan harga saat ini

Semua informasi tentang pergerakan harga sudah tercermin dalam harga/chart itu sendiri.

PART IV.

4. Stock market averages must confirm each other

In Dow’s time, the US was a growing industrial power. The US had population centers but factories were scattered throughout the country. Factories had to ship their goods to market, usually by rail. Dow’s first stock averages were an index of industrial (manufacturing) companies and rail companies. To Dow, a bull market in industrials could not occur unless the railway average rallied as well, usually first. According to this logic, if manufacturers’ profits are rising, it follows that they are producing more. If they produce more, then they have to ship more goods to consumers. Hence, if an investor is looking for signs of health in manufacturers, he or she should look at the performance of the companies that ship the output of them to market, the railroads. The two averages should be moving in the same direction. When the performance of the averages diverge, it is a warning that change is in the air.

Note:
Dow dalah hal ini setuju dengan adanya inter market correlation. Menurut dow Pergerakan indeks saham dari suatu sektor/kelompok harus diikuti juga dengan gerakan searah dari sektor/kelompok laiinya yang mendukung sektor/kelompok pertama tersebut. Dan harus ada keterkitan yang kuat antara dua sektor tersebut

Dalam studi kasusnya dow menggunakan 2 jenis index saham yaitu
Dow Jones Industrial Averages
dan Dow jones Tranportation Averages

Menurut Dow Jika terjadi kenaikan dibidang prodoksi maka otomatis akan terjadi kenaikan juga dari sisi transportasi (Transportasi dibutuhkan untuk distribusi barang)

PART V.

5. Trends are confirmed by volume

Dow believed that volume confirmed price trends. When prices move on low volume, there could be many different explanations why. An overly aggressive seller could be present for example. But when price movements are accompanied by high volume, Dow believed this represented the “true” market view. If many participants are active in a particular security, and the price moves significantly in one direction, Dow maintained that this was the direction in which the market anticipated continued movement. To him, it was a signal that a trend is developing.

From this tenet it follows that volume should increase when the price moves in the direction of the trend and decrease when the price moves in the opposite direction of the trend. For example, in an uptrend, volume should increase when the price rises and fall when the price falls. The reason for this is that the uptrend shows strength when volume increases because traders are more willing to buy an asset in the belief that the upward momentum will continue. Low volume during the corrective periods signals that most traders are not willing to close their positions because they believe the momentum of the primary trend will continue.

Conversely, if volume runs counter to the trend, it is a sign of weakness in the existing trend. For example, if the market is in an uptrend but volume is weak on the up move, it is a signal that buying is starting to dissipate. If buyers start to leave the market or turn into sellers, there is little chance that the market will continue its upward trend. The same is true for increased volume on down days, which is an indication that more and more participants are becoming sellers in the market.

According to Dow theory, once a trend has been confirmed by volume, the majority of money in the market should be moving with the trend and not against it.

Note:
Menurut Dow, pergerakan harga dipengaruhi leh naik turunya Volume. Volume merupakan salah satu penyebab harga bergerak dalam trend
jika seandainya harga bergerak dalam bullish trend maka harus diikuti oleh peningkatan volume juga. Alasannya adalah, suatu kondisi bullish akan disebut strong bullish jika diikuti oleh peningkatan volume, peningkatan volume ini menunjukkan adanya peningkatan kepercayaan di market bahwa akan terjadi penguatan lebih lanjut.

Tapi jika seandainya dalam kondisi bullish malah terjadi penurunan volume yang cukup signifikan secara tidak langsung sudah menujukkan akan adanya reversal trend. (Orang-orang sudah siap take profit)

Bahasa sederhananya adalah jika seandainya ada kondisi harga breakout maka sebaiknya diikuti juga oleh kondisi volume yang breakhigh juga

Source: Aditya Raja Ar Ra’du/Mata Dewa

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