Charles H Dow was the inventor of the dow theory.
Its the first system of forecasting the market trend with the help of price and volume.
Getting a daily chart of 2 years data we have to mark the major tops and bottoms as Higher top ,Higher bottom and lower top, lower bottom,
HB and HT is a sequence where idf the volume is high then the trend will be bullish .LT and LB is a sequence with a high volume its a bearish sign and can go for short position by considering the previous bottom as entry level.
Dow theory is for deriving and understanding the market trend not the price behavior.Dow theory is reliable only for positional trading duration of 2 months .
Its not helpful for Intraday.

  • : A system of understanding the market trend by using demand and supply which is mainly derived from the price and volume. Charles H Dow was the inventor of Dow theory who concentrated not on the company only on the market .
  • : Line chart is used for the forecasting of Dow Theory. Daily Chart of minimum 2 years data is required. And this method is helpful only for the positional trading not for intraday.
  • : By using line chart of data 2 years we have to mark the major tops and bottoms as High and Low.( HB, HT, LT, LB ) High bottom and High top is sequence if happened with a large volume then the trend is considered to be bullish. Lower top and Lower bottom is a sequence which happens with large volume is a good sign of bearish. Where as HT and HB not make a sequence same as LB and LT doesn't make a sequence.
  • : Dow theory helps to conclude the market trend but not the price behavior and is used only for long term trades ( 2months or more) but not in intraday and positinal for short term. Dow theory is not based on the company its only based on the price and volume to derive the demand and supply. As the information is transparent to everyone and one can find the market trend easily.
  • : According to dow theory the stocks will be bought at higher bottom and higher top sequence considering the previous top as entry and the HB as stoploss and higher top as the target price in bullish trend. Stocks will be sold at Lower top and Lower bottom sequence by considering the previous bottom as entry level and the Lower bottom as target and lower top as the as stop loss. The trend will be reliable for 2 months .
  • : Demand zone is known as support and the supply zone is known as resistance.
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