This is to understand how dow theory works and when to Long and Short in a Bullish Trend or Bearish trend respectively
- : Dow theory is an old concept which aims to derive the the demand and supply a stock possess and thus hoping to find the market direction
- : For Dow theory the chart should show 2 years worth of data on a daily chart and for convenience the chart style should be put as a Line Chart
- : Dow theory says that if in a market the demand is greater than supply the market tends to go up If the supply is greater than demand the market price may go down. Here Demand denotes the amount of buyers ready to buy the stock and supply means people who are ready to sell the stock
- : Dow theory is criticized at being too late and it also has the disability of finding trends too late. But it remains popular because It is the basic theory to understand how the market is going to move up or downwards
- : Using dow theory, if considering short position, the conditions for bearish is Low Top Lower bottom and the Stock can be sold when this cuts the previous bottom For long position it has to be bullish and thus Higher Bottom Higher top sequence has to be seen and the stock can be bought when the trend cuts the previous top.
- : Support is the area of Demand or that buyers are strongly Present there. Resistance shows Supply zone or that Sellers are present there.