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Tagged: Deamdn, Price, Supply, Technical Analysis
Dow theory is for a long term bet. It do not take into account short term volatility and trend reversal.
Dow theory is the basis from where all the other theory is formed.
Critics :
Dow theory involves long lookup period (minimum of 2 years) and hence it does not take into account the short term price volatility. Therefore, it can only be used for Long term investment. Also, this theory cannot help to identify the market behaviour which can only be understood with the help of Price patterns.
However, Dow theory remains at the top because it is one of the earliest methods that uses the market rather than studying the company’s aspects. Also, it is the first method to derive market trend based on Demand & Supply and hence becomes the basis for all other methods in Technical Analysis.
Dow theory is used for longer terms investment. It does not give accurate results for short term or intraday trading. it is useful for people who have holding capacity for longer periods. It is slow compare to other theories and methods.
However, it is one of the old and golden concepts as it gives proper support and resistance. It gives proper idea to the investor of when to buy, stop loss, target and when to sell. This is one first theory introduces by charles h. dow
<span style=”color: #777777; font-family: ‘Roboto Slab’; font-size: 13px; -webkit-tap-highlight-color: rgba(0, 0, 0, 0); -webkit-text-size-adjust: 100%;”>Dow theory can only identify the trend but cannot forecast the price movement for intraday or other short term trading. Since it is the one theory which explained the demand and supply long before in the 19th century it remains top of any analysis.</span>
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