Dow theory is the first ever concept to understand & identify the demand & supply thru Price & Volume. Observes the price movement rather than the company.
Since people will buy or sell only when they see a value, identify the trend & follow the same.
Charles H Dow’s observation is demand & supply based on price & volume but his conclusion is to spot the Top & Bottom, qualify them as Higher & Lower, identify the sequence with significant volume using minimum 2 year’s daily chart.
Top is the seller’s zone and bottom is the buyer’s zone.
Buy when the trend crosses the earlier Top after hitting a Higher Bottom and Sell when the trend falls below the earlier Higher Bottom after hitting a Lower Top.
HB-HT with volume = Bearing
LT-LB with volume = Bearish
DT suggests that v should follow the trend & not forecast the price movements and never aim for selling Top & Buying bottom.
DT is for deriving the trend and useful for positional and not for day trading.
trend should be seen over 2 to 3 months
Dow Theory
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