Dow theory

Dow theory is a form of technical analysis. It is based on the movement of demand and supply. The objective of Dow theory is to understand the trends prevailing in the market based on the demand and supply with price and volume as inputs.First the tops and bottom peaks need to be identified. then the higher top ( top higher than the previous top) and higher bottom( i.e bottom higher than the previous bottom) need to be identified. if the seqeuence is higher bottom and higher top with high volume it is a bullish trend and entry level will the prie greater than previous top and stop loss will price at the previous bottom. target price would entry level price and plus the amount of risk taken. If the trend is lower top lower bottom with high volume it is a bearish trend