Dow theory remains the fundamental for Technical Analaysis and is reliable for identifying the long term trends, either Bullish or Bearish. It is very reliable to identify the Demand Zone and Supply zone which is used for Buying and selling points.

  • : Dow Theory was invented by Charles H Dow. His entire study was based on price patters and trends. His theory revolved around the idea that price moves in patterns and trends. Price can be either in Uptrend or down trend which can be identified by analysing the peaks and bottoms in price movement. It also helps to identify the demand and supply zones
  • : We use Line charts to identify the long term trends as it gives the smooth output for a clear view. Duration used it minimum 2 years. Forecasting is done basis the breakout of price from the previous significant highs/lows as per trend,in which case stop loss is the previous significant bottom in case of uptrend and previous high in case of downtrend. price forecast is equal to the price difference between stop loss and buy price
  • : Market trends can be identified by analysing the peaks and bottoms as per the below mentioned sequence. Uptrend - Higher bottom and higher tops Downtrend - Higher tops and lower bottoms
  • : Dow theory even though quite old still remains the basis principle for all technical analysis for identifying the long term trends as it gives reliable patterns for technical analysis for identifying the demand and supply zones. Major criticism of Dow theory is done for its late buy signal as it misses the major price moves from the major reversal points till breakout
  • : Buying using Dow theory is done in uptrend when price breaks out of the previous high of previous top. Selling is done when the price breaks in downtrend the low of previous bottom.
  • : Support and resistance is the demand and supply zones which are the significant reversal points which pushes the price either up or down due to excess demand or supply. Since buyers participate at supply zone creating the demand which exceeds supply, it acts as support area for the price. At Supply zone supply exceeds the demand zone and hence acts as a resistance.
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