Dow theory helps us to identify the stock trend. this enables the trader to take the long term decisions.
This theory helps us to know the demand and supply zones which helps us to make wise decisions while placing any buy or sell order.

  • : DOW theory is one of the trading style where it uses the tops and bottoms to find a particular trend of the stock.
  • : We use line chart for dow and minimum look up period is for two years and duration of the trend forecasting for Dow theory should be 2 year data but decision of trend will be based on time period of that particular trend within the 2 years data.
  • : For Dow to be applied in practical, we need stock with two year of data of stock with line chart and we need to plot tops and bottoms on charts. If the the trend is higher highs with higher lows along with heavy volume consider it as bullish trend. Similarly if the trend is lower lows and lower highs with considerably high volumes then it is a bearish trend.
  • : If we use the Dow theory in practice we miss the major portion of up/down trend but it actually gives a better picture of up trending or down trending stocks.
  • : If the the trend is higher highs with higher lows along with heavy volume consider it as bullish trend, we buy the stock. Similarly if the trend is lower lows and lower highs with considerably high volumes then it is a bearish trend, we sell the stock. The trend is reliable until the above conditions prevails.
  • : Support and resistances are the demand and supply zones. For any stock support zone act as demand where the buyers are willing to buy at that particular price and Supply zone is the zone where the seller are willing to sell their stocks.
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