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my ds had discoid excema-told by pharmacist it was ringworm,treated it with fungicidal cream and it became sore and redder etc just as you describe.I them got some Aveeno cream from chemist applied it and hey presto it dissapeared as it was indeed discoid excema,it cant hurt to try Aveeno,lots of people with different excemas i know have tried it and with great sucess.
Is what your pharmasist recommedned Canesten with hydrocortisone? If so, I'm not much help as the symptoms you describe are exactly what I suffered from for years before finally finding this as my 'cure'. If, however, you have Canesten without hydrocortisone then it may not be working for you, as it didn't for me. Whether or not, in any event, you can use Hydrocortisone of this strength on your children though, will need to be checked out.
Orinoco, might just be worth trying the Canesten with hydrocortisone - for some reason the mix worked for me but neither Canesten nor hydrocortisone worked at all on their own! My brother has also suffered for years (and he has lived thousands of miles away from me for years too - but I don't take this too personally ) -from the same rings of itchy, dry skin and tried many different treatments from the prescibed to the exotic - and yet it was this mixture of Canesten & hydrocortisone that worked for him.
I sound like I have shares in the Company so will push off to bed now - but good luck. I know how distressing eczema can be.
My dd has discoid excema - and it was initially treated as ringworm. Ringworm tends to look 'healed' in the middle whereas discoid excema doesn't. We use 1% HC on the flares and Aveeno on her for general moisturising. Hope you get it sorted out.