Dow Theory – What is the Dow Theory?

What is the Dow Theory?

Definition of Dow Theory: This is a term which is linked with the different ideas that Charles H. Dow presented through his writings in 1800. He wrote regarding the several movements of costs in the trading market. Most of the technical analysts regard the definition of Dow Theory as a trend and an added advantage of studying the cost dynamics as the foundation of advanced technical analysis. As others summarized this theory from the editorials of Dow, the main concern is that the interpretations are vital. He never laid any assumptions. The Dow Theory has six popular tenets. The first is the market consists of three movements named as the main, medium and short swing. The second is the market trends also have three different stages known as acceleration, consolidation and entrance. The other tenet is the average of the stock market must be confirmed by everyone. Most of the trends get confirmation by volume and the trends survive until the ultimate signals confirm that they have finished.