Dow Theory and it’s uses

Dow Theory says the trend, Demand, Supply. It help traders to understand the market better and identify price and volume movements more accurately. Line chart is used for Dow Theory. The Line Chart with a minimum of two years data is used to forecast the trend for two to three months. If the sequence is formed with Higher Bottom and Higher Top with high volume, it is a Bullish trend. If the sequence is formed with Lower Bottom and Lower Top with high volume, it is Bearish trend.

• What is Dow Theory?: Dow theory is invented by Charles H Dow. Dow theory is higher bottom higher top with high volume it is Bullish and create long position. Lower top Lower Bottom with high volume it is Bearing and create short position.
• What type of charts used, minimum look up period, duration of trend forecasting for Dow Theory?: Line char is used and minimum look up period is 2years. The trend forecasting duration is 2-3 months.
• How to determine the market trend using Dow Theory?: higher bottom higher top with high volume it is Bullish and create long position. Lower top Lower Bottom with high volume it is Bearing and create short position.
• What are the major critics against Dow Theory? How come it remains on top of any analysis?: Dow theory is used to identify the trend and direction of market. It cannot be used for intraday. It is used to find Demand and Supply. It is found in 19th century and it remains at the Top.
• When to buy and sell using Dow Theory? For how long the trend will be reliable?: If we find Higher Bottom Higher Top with high volume then we can Buy using Dow Theory. If we find Lower Top Lower Bottom with high volume then we can Sell using Dow Theory.
• What are Support and Resistance?: demand is greater than the supply, price increases and after reaching a zone the supply increase as a result the price falls. This zone is known as resistance. When the price falls supply is greater than demand it reaches a level were the demand increases and this zone is known as the support .