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Dow theory is a oldest technical analysis price forecasting method. The analysis is based on demand and supply with volume.
On a line line chart, mark the Higher top,Higher bottom,Lower top,Lower bottom. If the sequence is Higher top-Higher bottom with high volumes – it is BULLISH. , If the sequence is Lower top-Lower bottom with high volumes – it is Bearish.
We need 2 years graph for forecasting the trend
It is the oldest theory which helps to identify the demand and supply in the market, it states the conditions for bullish and bearish market trend. It is a base for other price patterns, It tells us when to buy the stocks, but it is useful only for long term trading, 2 years charts care required for analysis.
This is the first technical analysis theory which talks about price movement based on demand and supply of the stock.
Dow Theory is developed by Charles H Dow, long back. It observes the market rather than the company fundamentals to arrive at whether there is bullish trend or bearish trend is forthcoming in medium term i.e., in couple of month time.
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