The most significant 30 stocks traded in the traded in NYSE and NASDAQ express their face value with price weight average known as the Dow Jones Industrial Average. This is often referred as DJIA by the investor in the financial world. The Dow price is calculated by weighted index method which means the companies whose share is trading in the market with the higher price is given greater weight in the index value. Professional traders often consider the DJIA as the sweet spot of long term investment. They use Double-stranded DEMA trading technique to trade the stocks for long-term return on investment.
Let’s see an interactive chart of DJIA with DEMA:
Figure: Double-stranded DEMA trading strategy for Dow Jones Industrial Average
The trading strategy is very simple and profitable for the long term investor in the Dow. The two double exponential moving averages are used in this trading strategy to trade the weighted price of the stocks only in favor of the trend. When the 6 DEMA crosses above the 15 DEMA it is considered as the bullish reversal on the contrary crossing of the 6 DEMA below the 15 DEMA is known as the bearish reversal. In the above figure, the prevailing trend is the uptrend.
Professional traders will only look for buying opportunity or bullish reversal crossover. The first DEMA crossover in the chart is ignored since it was bearish reversal signal. Followed by the bearish reversal signal a nice bullish crossover took place near the key support region of the Dow. Professional trader went long with the double stranded crossover of the DEMA. Setting the stop loss is very simple in this strategy. Stop loss is placed just below the bottom of the price before the bullish crossover took place. Most of the professional dow traders use this trading strategy for long term trading due to its simplicity and reliability.