Dow Theory Principles and intro to Charles Dow
The Dow Theory is a foundational principle of technical analysis in financial markets. It originated from the writings of Charles Dow, co-founder of the Dow Jones & Company, and was later refined by analysts like William Hamilton and Robert Rhea. Key Principles: Market Moves in Trends : Prices move in three types of trends—primary (long-term), secondary (medium-term corrections), and minor (short-term fluctuations). Three Phases of Trends : Primary trends consist of accumulation (informed buying), public participation (wider investor interest), and distribution (selling by early participants). Market Discounts Everything : Prices reflect all available information, including economic, political, and psychological factors. Indices Confirm Each Other : Trends are valid when confirmed by movements in both industrial and transportation indices. Volume Confirms Trends : Higher volumes support the validity of price movements in the trend direction. Trends Persist Until Reversed : A...