Dow Theory (Dow Jones Theory) is a business approach developed by Charles Dow.

The basic idea of the technical analysis of financial markets is the basis of the Dow Theory is that market price action reflects all available information and market price movement consists of three main trends.

dow theory of technical analysis

Dow theory of technical analysis

Every knowable factor that can affect both demand and supply is reflected in the market price action.

There are three trends in the market.

An upward trend according to Dow is the higher peaks and troughs. There are successive low peaks and trousers.

The Dow supposedly applied the markets to the laws of action and reaction as simply back to the physical universe which means that each important movement is followed by a fixed bridge.

The Dow considered a trend for three parts:

Primary ((compared to when the tides have reached the endpoint and reach further and further inland).

Secondary (compared to waves and normally one-third and two-thirds and most 3. Often retracing about half of the previous step between the previous trend movement represents an improvement in the primary trend)

Minor (wave) – these are fluctuations in secondary trend

Dow primarily primary.

(Chief) in which he paid attention to the trend of the three-phase repute:

Accumulation phase – The smartest investors are entering the market feeling the change in the current market direction.

Public Participation Phase – A majority of technicians begin to join as the price is advancing rapidly.

Distribution phase – a new direction is now commonly recognized and extended well; Economic news is up, increasing speculative volumes and wider public participation in all ends. Hours must confirm each other.

The Dow used to point out that until a previous peak exceeded both the industrial and rail averages, there is no confirmed inception or continuation of a bull market. There was no hint to be together, but the quick confirmation of each other was strong.

V Volume trend has to be confirmed.

Volume increases or decreases according to whether the price is moving in the direction of a trend in reverse. The DOE quantity is considered a secondary indicator. His buy or sell signals are held based on closing prices.

A trend is considered to be continuous until a definite signal of its reversal.

Overall the technical approach is the idea in market analysis to keep the trend in motion until the external force is based on it – just like any other physical goods to change its direction. And of a technical analysis course, there are signs of a reversal to be looking for.if you want to learn basic of stock market and advanced technical analysis visit our website.

Failure Swingfellier Swing.

At peak for the failure of the peak at C, he formed overcoming, followed by a violation of the low

S. Doe Theory on a “sell” signal.

C A b. Notice that the signal S1 is higher than before falling, while others will need to look at a low high E before turning bearish into S2, but some DOE theorists would see an IL sell.

The Dow only took the closing prices of the idea. The average was more than a previous peak close or less than a previous trough to be significant. Intra day penetrations did not count.

Failure swing bottom

Failure swing bottom.

The “Buy” sign takes place

When point B (at BL) is exceeded.

Non-failure swing bottom

Non-Failure Swing Bottom.

Buy “are found on B1 or B2 digits