Dow theory

Dow theory should definitely be used for longer duration stock trading.Higher top-Higher bottom and lower top-lower bottom to be used as per volume trends.

• What is Dow Theory?: It is a technical analysis which distinguishes the overall direction of the market.Peak is defined as the highest price of a market movement and trough is the lowest price of a market movement.
• What type of charts used, minimum look up period, duration of trend forecasting for Dow Theory?: Line charts are used for dow theory.Daily charts are required with minimum 2 years of data.It can be used for minimum 2 months timeline.
• How to determine the market trend using Dow Theory?: The market trend can be analysed with 2 years of data as high and low price value of the stock.
• What are the major critics against Dow Theory? How come it remains on top of any analysis?: It provides analysis only for longer duration and not for shorter duration.It is on top of analysis because of deriving the trend accurately.
• When to buy and sell using Dow Theory? For how long the trend will be reliable?: We can buy stock when the trend is higher bottom-higher top with good value and can sell when there is lower top-lower bottom.It is reliable for 3-4 months.
• What are Support and Resistance?: Support is the price level at which stock has had a difficult falling.Resistance is a price point at which upward price movement is impeded by an overwhelming level of supply at a particular price level.