Dow theory is the mother of all other technical analysis. It is used as the base to develop the theory. It is very simple and straight forward. In this theory misinterpretation of the fact is impossible, we can decide either uptrend or downtrend confidently and with ease.

  • : Dow theory is used to find the trend of the market, if the chart shows higher top and higher bottom then bullish, if chart shows lower top and lower bottom the bearish
  • : Line charts are used, minimum lookup period is two years and it is used for long term.
  • : In line charts one has to mark up the major tops and major bottoms, then HT, HB, LT and LB are marked. If it makes series of ht and hl then up trend, if series of lt and lb then down trend.
  • : The limitation is it analyses for long term only, in long term any unforseen misgivings happens then market might crash, hence loss. It remains in top due to its simplicity.
  • : The buy can be initiated when the top is broken without breaking the low of the swing, added feature is with high volume. It holds good as long as a low is broken. The sell will be initiated once LT forms and bottom before this LT is broken.
  • : Support is the price where the buyers are ready to buy the share in huge volumes. Resistance is the price where sellers are ready to sell the shares in huge volumes.
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