Basics of Dow Theory | Dow Theory

A review of the Dow Theory signals implies that a secondary trend will usually bounce at least 4% on both the Industrials and Transportation Indices, and usually ...BasicsofDowTheory OnJanuary31st,1901CharlesH.Dowcomparedthestockmarkettothetidesoftheoceanwhenhewroteinthe WallStreetJournal "Apersonwatchingthetidecominginandwhowishestoknowtheexactspotwhichmarksthehightide,setsastickinthesandatthepointsreachedbytheincomingwavesuntilthestickreachesapositionwherethewavesdonotcomeuptoit,andfinallyrecedeenoughtoshowthatthetidehasturned.Thismethodholdsgoodinwatchinganddeterminingthefloodtideofthestockmarket." IfyouthinkoftheDowJonesIndustrialAverageasbeingthemeasureofthetideononepartofthebeach,andtheDowJonesTransportationAverageasameasureonanotherpartofthebeach,bothusedtodeterminethatthetideisindeedcominginorgoingout allalongtheseashore,ratherthanroguewavesinoneplaceortheother,youwillunderstandwhatDowwasgettingat. ConfirmationbybothisanintegralpartoftheDowTheory.The"fewhypotheses":Manipulationispossibleday-to-daybuttheprimarytrendcannotbemanipulated.TheAveragesdiscounteverything(exceptactsofGod).Thetheoryisnotinfallible.The"definitetheorems":Therearethreemovementsoftheaverages.Thefirst,andmostimportant,istheprimarytrend.Thesecond,andmostdeceptiveisthesecondaryreaction.Thethird,andusuallyunimportant,isthedailymovement.BoththeIndustrialandTransportationaveragesmustconfirmatrend.ThedeterminationofamajortrendhascometobeknownasasignaltoBuyorSell,althoughDownevercalledthemsuch. TheclassicBuysignal isdevelopedasfollows:AfterthelowpointofaprimarydowntrendinaBearmarketisestablished,asecondaryuptrend(thisisthemostoftendebatedpartoftheTheory)bouncewilloccur.Afterthat,apullbackononeoftheaveragesmustexceed3%,accordingtoRobertRheainhis1930'sTheDowTheory, mustthen,ideally,holdabovethepriorlowsonboththeIndustrialandtheTransportationAverages.Finally,abreakoutabovethepreviousrallyhighbyboth,constitutesaBUYSignalforthedevelopingBullmarket.ThechartrepresentshowtheDowJonesIndustrialAve

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Dow Theory | Dow Theory
Dow created the Industrial Average, of top blue chip stocks, and a second average of top railroad stocks (now the Transport Average). He believed that the ...
Basics of Dow Theory | Dow Theory
A review of the Dow Theory signals implies that a secondary trend will usually bounce at least 4% on both the Industrials and Transportation Indices, and usually ...
Dow Theory: Strategy of the Six Tenets | Dow Theory
Dow theory explained. The Dow theory is based on the analysis of maximum and minimum market fluctuations to make accurate predictions on the direction of the ...
Dow Theory: The six tenets | Dow Theory
Dow theory explained. The Dow theory is based on the analysis of maximum and minimum market fluctuations to make accurate predictions on the direction of the ...
Dow Theory [ChartSchool] | Dow Theory
The objective of Dow Theory is to utilize what we do know, not to haphazardly guess about what we don't know. Through a set of guidelines, Dow Theory enables ...
What is Dow Theory? | Dow Theory
What is Dow Theory? The theory explains how the stock market can be used by investors to understand the health of the business environment. It was the first ...
The Dow Theory (Part 1) – Varsity by Zerodha | Dow Theory
Dow Theory suggests the markets are made up of three distinct phases, which are self-repeating. These are called the Accumulation phase, the Markup phase, ...
Dow theory | Dow Theory
Dow theory asserts that major market trends are composed of three phases: an accumulation phase, a public participation (or absorption) phase, and a distribution ...
Dow Theory Definition | Dow Theory
The Dow theory is a financial theory that says the market is in an upward trend if one of its averages (i.e. industrials or transportation) advances above a previous ...