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How to determine the market trend using Dow Theory?
The market trend can be analysed by daily line charts with 2 years of data using Dow Theory.
In the chart, need to mark the tops and bottoms. And qualify them as Higher Top(H.T), Higher Bottom(H.B), Lower Top(L.T), Lower Bottom(L.B).
Follow the sequence with the significance of volume at breakout to determine the trend.
Bullish: H.B – H.T and Bearish: L.T – L.B.
Steps to determine the market trend using Dow Theory,
1) Take the data of approx 2 years and plot it into line chart.
2) Mark the tops and bottoms.
3) Qualify the tops and bottoms (ex :- Bottom, Higher Bottom, Top, higher Top)
4) Look for a sequence to find the trend.
If the sequence is formed with Higher bottom and Higher Top with significant volume it is a Bullish trend.
If the sequence is formed with Lower bottom and Lower Top with significant volume it is a Bearish trend.
we need to take the data of approx 2 years and plot it into line chart then we should mark the tops and bottoms. Qualify the tops and bottoms Look for a sequence to find the trend.If the sequence is formed with Higher bottom and Higher Top with significant volume it is a Bullish trend. If the sequence is formed with Lower bottom and Lower Top with significant volume it is a Bearish trend
Through chart we have to consider 2 years market and mark the higher tops and higher bottoms as well as lower tops and lower bottoms.
After marking ,we have to watch out for higher top-higher bottom sequence ,in case of buying and lower top-lower bottom for selling.
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