A tough but profitable Dow Jones trade

This trade made use of Elliot wave theory and Fibonacci retracement to make a profitable contrarian bet on the Dow Jones.

Some trades are harder to execute than others. To grasp this one, you'll need to have at least a rough idea of how Elliott waves and Fibonacci principles work. But then, as with most things in life, there is no gain without at least some pain.

In early November, I was tracking the Dow as it made a series of overlapping rallies since hitting a low in late August. With the market having rallied sharply since the March 2009 low (which was around the 6,500 area), I wasn't interested in taking long trades, not even on a short-term basis. The risks were just too high.

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John is is a British-born lapsed PhD physicist, who previously worked for Nasa on the Mars exploration team. He is a former commodity trading advisor with the US Commodities Futures Trading Commission, and worked in a boutique futures house in California in the 1980s.

 

He was a partner in one of the first futures newsletter advisory services, based in Washington DC, specialising in pork bellies and currencies. John is primarily a chart-reading trader, having cut his trading teeth in the days before PCs.

 

As well as his work in the financial world, he has launched, run and sold several 'real' businesses producing 'real' products.