Thread 🧵on Six tenets of #DowTheory of #TechnicalAnalysis
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#TechnicalAnalysis #StockMarket
This principle explains that any information available in market is already reflected in price of stocks & indices. This includes all data such as earnings announcements by companies, rise (or fall) in inflation or even sentiments of investors.
This theory was the first to propound that the market moves in trends.
The trends are:
✅Primary Trends
✅Secondary Trends
✅Minor Trends
The theory says that there are three phases to each primary trend:
✅accumulation phase
✅public participation phase
✅panic phase
A trend in the market cannot be verified by a single index. All indices should reflect the same opinion.
Trend in market should be supported by trading volumes.
For eg, in upward trend, volume rises with increase in price and falls with decrease in price. And in downward trend, volume increases with fall in price and decreases with price rise.
Theory says that trends exist despite any noise in market. That is, during upward trend, a temporary trend reversal is possible but market continues to move up and trend continues until clear reversal happens.
Even though it is more than a hundred years old, the Dow Theory is still relevant in the current trading market.
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