Dow theory, though a very old concept, is a golden theory. It is a technical analysis which uses at least two years of data to spot trends and reversals to give an investor an idea of when to buy or sell. The use of this theory is mainly for long term investments. Trends are reconfirmed with volumes to make a call. Since dow theory follows trends, there is a possibility of missing out on huge initial reversals . But Dow theory along with other analysis is still known to be very reliable and useful.
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