Many investors ask what strategy to use in either the Stock Market or Dow Jones Industrial Average when trading daily charts. They don’t understand why they should make their picks during this time of the day or why they can trade both the index and stock market the same way. In order to understand which strategies to use, it is important to realize that not all of the daily charts are created equal when it comes to the stock market and Dow.
We must understand that even though the Dow starts out the day in support, support does not mean that a stock will always perform as expected during the course of the day. The stock market and Dow are not one and the same. Support and resistance levels exist in many different areas of the chart.
For example, during the first week of December 2020, the Dow started out with support levels near 5, it then went up with a strength wave and broke through support to the upside. So, during this time, when the Dow went up, the support was broken, which resulted in a strong gain for the Dow.
However, over the next few weeks, the support levels were back to its normal level. At that point, when the markets fell apart and the Dow plummeted, it took a while for the market to recover and the price recovered a little, but only barely.
When you are attempting to trade the stock market or Dow, it is important to realize that there are plenty of reasons to break down the support levels during each period of time. If the markets fall through support levels, you must check the market and see if there are any support levels above that level, and then you must buy.
However, if the markets rise through the support levels, you must buy those shares for the stocks that performed the best. The best performing stocks may lose a little, but when the market recovers from its decline, there will be greater gains than selling during a period of support.
Therefore, while you should look at the Dow as a support, it doesn’t mean that it is going to perform well all the time. Therefore, during the times when the Dow is going up, you need to be buying and during the times when the Dow is going down, you need to be selling.
Learn from the previous week and use that information to plan your moves. As we have seen, the support level often changes, so you should study the chart and look for support levels, but during the time when the market goes up, you need to be selling and during the time when the market goes down, you need to be buying.
What is important is to realize that the support levels change during each week and you should get used to using the new ones. When you learn to read the charts and understand what is happening and what is coming, you will see that there are many reasons to buy and sell stocks and market sectors, all the time.
While we do not recommend you try to trade the stock market or Dow without knowing what the charts are saying, it is important to understand the signals that are showing strong gains and losses during the course of the week. You must learn to read the signals and get used to reading the support and resistance levels.
For the most part, the Stock Market and Dow are not the same thing and it is important to know what they are and how to trade them during strong gains and during large losses. There are many reasons to trade the stock market or Dow, so learn the principles of investing and knowledge from the past to gain knowledge for the future.