Dow Theory principles

Charles Dow is consider the father of modern technical analysis and Chartism. He developed a theory about markets (in fact about stocks markets, but very useful for forex analysis too), and it could be a good reading if you want to understand what Market Sentiment means. The theory fundamental points are as follows:
1. Price discount everything. Meaning price reflects all market forces that could affect stocks, like for example, supply and demand, political factors, market sentiment and even natural disasters.
2. Price moves in trends. And so we are able to identify patterns; Trends could be bullish, when both maximums and minimums keep on being higher or bearish when both maximums and minimums keep on being lower. At the same time trends could be primary, secondary and tertiary regarding their duration. Each bullish and bearish market had typical stages as follows:
1- Bullish Market
A primary bull market is defined as a long sustained advance […]

Original post by Valeria Bednarik

This entry was posted on Tuesday, October 21st, 2008 at 9:14 am and is filed under Technical Education. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.