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15

420O -

4000 -

3800

600

It".

TQ 20/20 © 199T CQC Inc.

Figure 5.1 Daiiy bar charts of December 1 990 Gold Futures -what isthetrend in gold? There are three trends which are marked and clarified in Figure 5.2.

December 1 990 Gold Futures Daily Bar Chart

4 200 -4000 3800

3600

5

4500 4 3 500

I- "I" il„ ,1

III ly-"it,„H

".1 1

/14/

Il : 111......

9/ / 0

JUN JUL OCT IAN APR JUL OCT AN APR

1989 1990

TQ 20/20 91991 CQG Inc.

Figure 5.2 Daily (top) and weekly (bottom) bar charts of December 1990 Gold Futures-the three trends. The long-term trend (months to years), indicated by line A on the lower chart, is down. The intermediate-term trend (weeks to months), indicated by line B, is up. And the short-term trend (days to weeks), indicated by line C, is down.



DI WEEKLY BAR CHART

30000

25000

20000

15000

Higher Hihs

Intermediate Low

Higher Lows

1 01

APR JUL OCT

jAN 1988

APR JUL OCT

)AN 1989

APR )UL OCT

TQ 20/20 91991 CQG Inc. Figure 5.3 The Dow Jones Industrials Weekly Bar Chart-the Dow in an uptrend (bull market). An uptrend is a price movement consisting of a series of higher highs and higher lows.

can accurately time your buys and sells to maximize profits and minimize losses in any market. From Dow Theory, I have abstracted the following definitions:

Upward Trend-An upward trend is a series of successive rallies that penetrate previous high points, interrupted by sell-offs or declines which terminate above the low points of the preceding sell -off. In other words, an uptrend is a price movement consisting of a series of higher highs and higher lows (see Figure 5.3).

Downward Trend-A downward trend is a series of successive declines which penetrate previous low points, interrupted by rallies or increases which terminate below the high points of the preceding rally. In other words, a downtrend is a price movement consisting of a series of lower lows and lower highs (see Figure 5.4).

If you leam anything from this book, leam these definitions. They are very, very simple but also of cmcial importance. These definitions are completely general in that they apply to any market and to any time period. I think it is simple to see from the hypothetical figures that following the trend is the



way to make money in the financial markets. What is not quite clear in the definitions is how you determine

Gold Futures 1990 Weekly Bar Chart

Price

5000 -

4500 -

4000 -

3500

Lower

Lower Lowe

APR JUL OCT IAN APR UL OCT AN APR JUL OCT

1988

1989

TQ 20/20 1991 CQG Inc. Figure 5.4 The 1989 Gold Futures Weekly Bar Chart-gold in a downtrend. A downtrend is a price movement consisting of a series of lower lows and lower highs.

where the previous high and low points are. This depends totally on whether youre focusing your trading activities in the short-term, intermediate-term, or long-term trend-that is, whether you are trading, speculating, or investing.

No matter what market or what time period you participate in, you wont make money (except by



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