Dow Theory

The Dow Theory is a technical framework that predicts market in upward trend if one of its average advances above the previous important high, accompanied by similar advance in the other average.
This theory predicted on the notion that the market discounts everything in a way consistent with the efficient market hypothesis
This theory was put forward by Charles H Dow
Daily line charts are used for predicting dow theory. Minimum look up period is 2 years and duration of trend forecasting is 2-3 months
Market trend is identified by identifying major top and major bottom, Qualifying them: Higher Bottom Higher top, Lower bottom, Lower top. Higher Bottom to Higher top  Bullish Veiw. Lower Top to lower Bottom  Bearish view. Volume should be considered
Major critics against dow theory is Dow theory gives only directions and not the time frame or price for entry or exit. It gives late signals to the investors when the market trend is finished. But stil the theory holds good because it was the first theory which explained demand and supply long before 19th century and it remains top of the analysis.
When the trend is HB to HT , we can buy . When to buy is when it crosses the previous T/HT
When the trend is LT to LB, we can sell. When to sell is when it crosses previous LB
The trend is reliable is for 2-3 months