The Daw Theory [Part Two]

1 October 2016, 10:03
Muhammad Elbermawi

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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