Dow theory is a Study about the Stock Price Direction on Time vs price scale.It helps in knowing the Demand and supply levels.Dow theory is proven reliable method in knowing the price direction for Longer term.
When a stock makes a Higher Bottom and Higher Top then it is in Bullish Trend
Lower Top and Lower Bottom – Bearish Trend
By knowing the proper resistance and support levels one can plan the entries ,stop and exit in stock using by taking the Short or Long trades based on Dow Theory rules.
What is Dow Theory?: Dow Theory is one type of Technical analysis in understanding the price direction .Using Dow theory principles one can plan entries in a trade.
What type of charts used, minimum look up period, duration of trend forecasting for Dow Theory?: For Dow theory mainly Minimum 3 months time line charts are used. Daily time frame is used on charts.However viewing the six months to one year charts is much better.
How to determine the market trend using Dow Theory?: Higher top and higher bottom is bullish trend, whereas Lower top and lower bottom is Bearish trend.
What are the major critics against Dow Theory? How come it remains on top of any analysis?: Dow theory does not helps in analysing the day to day movements in stock price. Dow theory is proven method in predicting the stock price direction for longer terms.
When to buy and sell using Dow Theory? For how long the trend will be reliable?: We can BUY stock when the Price is making a higher bottom-higher top with a good volume and can SELL when the Price is making a lower top-lower bottom with a good volume. it is reliable for 3 to 4 months in general but one can also trail the stop loss as far trend is
