Dow Theory will predict the market trend. It will mainly study about the Demand and Supply. When Demand is more, it is time for Buy. When supply is more, it is time for Sell. For identifying the trend, we require minimum two years data points. The sequence will be Higher Bottom-Higher Top and Lower Top-Lower Bottom, which denotes buy and sell signal respectively. The trend will be valid for 2 to 3 months only.
We can identify the Supply zone and Demand zone using Dow Theroy.
- : Dow Theory mainly speaks about the concept of Demand and Supply. Dow has studied about the market and based on buying and selling, he developed Dow Theroy and correlated with Demand and Supply.
- : Mainly Line chart is used and the line charts data points should have minimum two years length. It specifically says about market trend. The trend continues till it is reversed. The duration of trend forecastin for Dow Theroy is two to three months.
- : By analysing two years data, one has to mark all Bottom points and High points. Marking should be in a sequence like bottom - high, bottom - high etc. After marking normal bottom-high, one has to identify as higher bottom and lower bottom. And , mark higher top and lower top. The higher top points are - demand zone. The lower bottom points are- supply zone. Higher bottom and higher top denotes the market is in bullish trend. It should be confirmed with good volume. Lower top and lower bottom denotes bearish trend, again it should be confirmed with volume. So go for Long along Higher bottom-Higher top, when it crosses the previous day High. Go for short along Lower top -Lower bottom, when it falls below previous day low.
- : It remains top of any analysis because it says about the market trend, either positive or negative.
- : When demand is more than supply, it is time for Buy. When Supply is more than Demand, it is time for Sell. The trend will be reliable for 2 to 3 months.
- : Support: When price is falling, there will be a point to reverse the pattern, that point is called Support zone. It will not allow prices to below this level. Resistance: When prices are moving high, there will be a point to reverse the pattern, that point is called Resistance Zone. It will not allow prices to go further.
- : What are major critics against Dow Theory?