Dow theory explains how the stock market can be used by the investors to understand the market trends.
It mentions that market is an upward trend if one of its averages advances above a previous important high. Six components of Dow theory : 1) Market Discounts Everything, 2) Market has three Trends, 3)Trends has three phases, 4) Indices confirm each other, 5) Trends are confirmed by volumes, 6 )Trends persist until a clear reversal occurs
It uses Demand and Supply to analyse the trend. If price tends to go up, it;s considered as Bullish and if the price tends to go down, it’s considered as Bearish
Hi,
My Question 1 :: Dow theory reliable for how long?
In general, a secondary, or intermediate, trend typically lasts between three weeks and three months.
My Question 2 :: Explain briefly why Dow theory still on top list?
Dow Theory is used to identify the direction of the major trend in the stock market and dow theories help form the backbone of most technical analysis courses worldwide.