William Peter Hamilton (Dow Theory)

1. The Stock Market Barometer (1922), William Peter Hamilton: full text on the Internet Archive — book or paper, 1922
   Public-domain book; the full text was downloaded and the passages below were checked in it. The theory is Charles Dow’s as stated by Hamilton.

• FilterThree movements run at the same time: the primary movement (a bull or bear market, tending to last at least a year and generally much longer), the secondary movement (sharp rallies in a bear market and sharp reactions in a bull market) and the daily fluctuations.
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• FilterThe two averages (industrials and railroads) must confirm each other: there is never a primary movement, and rarely a secondary one, in which they do not agree. They need not move on the same day or week; it is enough that they take the same direction.
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• FilterA “line” is a succession of closing prices over a sufficient number of days with fair trading volume within a narrow range (for example, industrials between 70 and 74 for weeks). He reads it as a period of accumulation or distribution.
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• FilterUse closing prices only. A break out of the line “will confidently indicate” a change in market direction of at least a secondary character, provided it is confirmed by the other average.
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• FilterFor a single active stock the book quotes the same idea: if it stays in a narrow range (say two points) for long enough to form a horizontal line, that suggests accumulation or distribution, and a double top followed by another decline can lead to a further fall.
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• EntryWhen both averages rise above the high of the line, the indication is strongly bullish: in a bear market it can mean a secondary rally, and in 1921 it meant the start of a primary bull movement.
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• ExitWhen the averages break below the low of the line, the market has reached a “saturation point”: it signals a secondary bear movement in a bull market or the start of a primary downward movement.
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• DisciplineThe theory is a barometer of the market’s direction, not a guide to individual trades: it says nothing of stops or position size, and the averages are read as a whole, not by single stocks.
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Often attributed to this trader, but not found in the sources above. Not listed as his or her rules.

• The modern “higher highs and higher lows in both averages” checklist and volume rules attributed to Dow Theory are later summaries; they are not stated as rules in the chapters read here.

Written about two US stock averages in 1922. The book describes how Hamilton read the market after the fact and gives no systematic results or costs; applying it to a single crypto coin means inventing the second “confirming average”.