1) What is #Dow Theory?

• Dow Theory is a trading approach developed by Charles Dow who is also known as the father of Technical Analysis. It is still the basis of technical analysis of financial markets.

• The basic idea of Dow Theory is that market price action reflects all available information and the market price movement is comprised of three main trends.

• Most of technical analysis theory today has an origin from ideas proposed by Dow & Edward Jones back in 19th century

Those ideas were published in the Wall Street Journal and are still assimilated by most of the technicians.

• Dow Theory still dominates the far more sophisticated and equipped modern study of technical analysis.

2) The 6 tenets of Dow Theory

1. Market moves in summation of three trends: Primary, Intermediate & Minor Trend.

2. Market trends have three phases: For uptrend, the phases are Revival of confidence (accumulation), Response (public participation),Over-confidence (Speculation)

The three defined stages of the Primary Bear Trend are Abandonment of hope (Distribution), Selling on decreased earnings (doubting), Panic ( distressed selling ).

3. All news is discounted in the stock market.