Dow theory is a major part of technical indicator , it helps us identify demand and supply zone.
A minimum of 2year line chart is required to identify major top and bottom and thereby helps us identify the trend. It should be combined with other technical indicators for short term trading
- : It is an integral part of technical analysis which studies price movement and volume. It tells us about demand and supply zone
- : We use line charts with daily time frame and minimum time period of 2 years for Dow theory.
- : Market trend is determined with first marking major bottom and top and marking them as higher bottom ,higher top and lower top and lower bottom. Higher top and higher bottom- bullish lower top and lower bottom is Bearish
- : Dow theory tells us about the trend and also provides demand and supply, important part of technical indicator. But it doesn't suit for short term trading and we have to depend upon other indicator for short term trading
- : When it is higher bottom and higher top it s bullish market we can go long when it crosses the previous high, when market moves with lower bottom and lower top then it is bearish trend- we can go short. Dow theory highlights that primary trend can last for 1 year or more.
- : Support is when demand is more than supply Resistance is when supply is more than demand