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What Are The Basic Principles Of Dow’s Theory?

Answer»

Dow’s Theory is the oldest and the most known theories of technical analysis. It was PROPOSED by CHARLES H. Dow. Dow’s theory has put forward six basic principles:

  • The averages discount everything. 
  • MARKET has three main movements. These are primary, secondary and minor movements.
  • LINES indicate movements. Such a movement indicates either accumulation or distribution.
  • Price-volume relationships PROVIDE background.
  • The price action determines the trend in the market.
  • The averages must confirm i.e. the movements of two different market indices must confirm each other to confirm the overall trend.

Dow’s Theory is the oldest and the most known theories of technical analysis. It was proposed by Charles H. Dow. Dow’s theory has put forward six basic principles:


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