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Dow Theory
by Evgenia Gencheva Sun Sep 04, 2016 12:04 pm
The theory of Dow. It was created by Charles Dow, then owner and editor of the Wall Street Journal. As we know then there was no TV, radio is still toddlers, so that the print media were the main source of information, but without doubt the Wall Street Journal - the most influential financial media in the world. Without issuing a separate book, Dow published numerous articles that cause heightened interest among speculators. In the 30s of the XX century two great technical analyst Robert Rhea and William Hamilton added by themselves and issue and "Dow Theory." In his studies Dow interested in the behavior of market indexes on the Stock Exchange that as aggregates give a comprehensive picture of the status of a market and price behavior.
Basic principles of Dow Theory:
1. Everything is in the price - all economic and statistics, natural disasters and cataclysms, rumors, and any other factor beyond graphics. When something unexpected happens, it affects immediately and leads to a change in prices.
2. Markets always move in the trend, the shortest and precise definition of a trend - the main prevailing direction of price movement.
3. There are three types of trend - upward, downward and sideways:
- Ascending aka bull trend, up trend, upward - need each subsequent peak and each successive floor are higher than the previous; technical analysis
- Descending aka bear trend, dawn trend, dawnward - need each subsequent bottom and each successive peak to be lower than the previous;
- Sideways, aka flat market, horizontal market, which is in-itself is absurd - in sideways no clear direction of movement, series of higher or lower peaks or bottoms.
4. Each general trend incorporates smaller trends, according to their duration trends are divided into:
- Primary a duration of 1 to 3 years, recent experience shows that the main trends in Forex can also be longer;
- Secondary, which is the correction as the primary 1/3, 1/2, 2/3, which are actually Fibonacci retracements lasting several months;
- Tertiary / small daily departures / lasting from one day to several weeks.
Basic principles of Dow Theory:
1. Everything is in the price - all economic and statistics, natural disasters and cataclysms, rumors, and any other factor beyond graphics. When something unexpected happens, it affects immediately and leads to a change in prices.
2. Markets always move in the trend, the shortest and precise definition of a trend - the main prevailing direction of price movement.
3. There are three types of trend - upward, downward and sideways:
- Ascending aka bull trend, up trend, upward - need each subsequent peak and each successive floor are higher than the previous; technical analysis
- Descending aka bear trend, dawn trend, dawnward - need each subsequent bottom and each successive peak to be lower than the previous;
- Sideways, aka flat market, horizontal market, which is in-itself is absurd - in sideways no clear direction of movement, series of higher or lower peaks or bottoms.
4. Each general trend incorporates smaller trends, according to their duration trends are divided into:
- Primary a duration of 1 to 3 years, recent experience shows that the main trends in Forex can also be longer;
- Secondary, which is the correction as the primary 1/3, 1/2, 2/3, which are actually Fibonacci retracements lasting several months;
- Tertiary / small daily departures / lasting from one day to several weeks.
Evgenia Gencheva- Administrator
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Join date : 2016-09-02
Age : 40
Location : Milan, Italy
HM Masum- Quest
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Ahmed Sadek- Quest
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