Initially invented by Charles H Dow, the Dow theory is used to gauge the direction of the market in respect to share prices. It is one of the indicators of share prices used in technical analysis. The analysis involves identification of higher tops, higher bottoms and lower tops and lower bottoms wherein, the higher tops and higher bottoms indicate a bullish trend signalling the trader to take a long position, and the lower tops and lower bottoms indicate a bearish trend meaning the trader has to take a short position.The objective of this theory is to identify the trend or price patterns of shares in the market and take appropriate positions.
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