The Daw Theory [Part Two]

1 October 2016, 10:03
Muhammad Elbermawi
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Dow Theory theorem

One of the theorems of Dow Theory is that the ideal market picture consists of an uptrend, top, downtrend, and bottom, interspersed with retracement and consolidations.

 

 

A second theorem of Dow Theory is that economic rationale should be used to explain stock market action. Remember that Dow created both an industrial average and a railroad average. Although we have no record of Dow's precise reasoning for doing so,

 

A third theorem of Dow Theory is that prices trend. A trend is defined as the general direction in which something tends to move.

 

Dow's theory posited that there are three basic trends which are Primary trend, intermediate trend & secondary trend.



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