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Dow theory can determine only the direction of price movement ie, bullish or bearish ,and it is late in indicating the trends.
The characteristics of the price movement can be determined with the help of price patterns.
Dow theory is the basics for the study further studies which evolved from it are price pattern such as Head and shoulder, cup, triangle, flag, double top & double bottom.
Dow theory is used for long term investment and it determine the earning ability of stock based upon demand and supply.
Pattern gives the characteristics of market based upon price fluctuation
Dow Theory is the base. Its used to understand the trend based on Demand & Supply. Its good for long term investment.
Price patterns are used to understand the characteristics & nature of the fluctuation. And these are mostly short terms lasting few months.
DOW theory takes a long duration to determine the trend whereas the price patterns give us an early indication of the trend.
Dow Theory helps us in identifying the demand and supply, in turn the trend of the market i.e, positive or negative. It lacks in defining the characteristic behind the trend and also it delays in providing us the right signal.
Price pattern which takes the base of the Dow theory gives the characteristic behind the price movement in addition to identifying the supply and demand. It also provides us the early signal to enter the market.
(Dow theory explains the movement of the trend with respect to demand and supply, whereas price patterns explains the nature and characteristics of the trend and also its significance.)
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