Know How to Use the Dow Theory to Aid You in Your Trading

The Dow Theory is the traditional method of identifying changes in trends in the American stock market. The main purpose of the concept is to determine changes in the primary objective of the market. Charles H.Dow was the founder of the Dow Theory in 1900. The Dow Theory was used as a standard for business models rather than as a tool for predicting market prices in those days. The principles were further developed by William Peter Hamilton in 1922 and later published by Robert Rhea in 1932 and E. George Schaefer in a series of articles for practical use today.

The Dow Speed ​​allows the trader or other currency trader to be careful when exiting the market when warning signs of a stock market reversal appear. While the Dow Theory has no predictive value for the duration of the trend, it simply focuses on the direction of the trend. The concept assumes that most markets follow market trends most of the time. To narrow the market, Charles H.Dow created some indexes known as the Dow Jones Industrial Average and the Dow Jones Industrial Average. So how do you translate a project correctly to make it work for you? What do you need to understand when interpreting the Dow Project?

In order to properly interpret the project, you need to use the daily closing costs for 2 years since the day-to-day payment is better, with the total number of daily transactions based on the New York Stock Exchange (NYSE). We should consider it a blessing and a blessing because of the technological advancement, the closing costs are available and the labor force is not working.

There are 6 key points to light for the Dow Project. They are:

* The average price is everything

This process eliminates all known and well-known properties related to the demand and supply of timber.

* There are 3 market movements

There are 3 free moves in the stock market. This is the first, second and smallest response. This is similar to the characteristics of primary, middle and short-term education.

* There are 3 market segments

The 3 components are collection, public input and distribution. Collective bargaining is the first step in buying or selling buyers and sellers to buy goods in the market sense. It is also known that the intermediary strategy is that one is trading or investing in the opinion of the majority. In this case, the price of the animals was not significantly different because the sale and demand of the goods were matched by these knowledgeable traders and lenders who were in the minority who sucked or gave too. Eventually, the market took hold and the price shifted rapidly in the second phase, which is known as the public input phase. This will result in opportunities for prospective students and other tech-savvy entrepreneurs. This phase continues until the phase 3 is strongly opposed, known as the distribution phase. At this stage, savvy traders and lenders begin to distribute their holdings in the market.

* The price and quantity relationship provides the background

The relationship between cost performance and asset size must work together. This means we need to increase the quantity on events when the price goes up and the contracts go down when the price goes down. If the price goes down during the price and the price goes down, this is a red flag that warns you that the price is likely to be very high. Before you decide, the strongest evidence for change should be based on the average annual cost.

* Payment will determine the status

Bullish and bearish signals are issued when the market price action agrees with the signals. However, since the analysis is different for all people, the best decision is to take an unethical approach if the evidence is overwhelming. It is said that this phenomenon persists until the permanent signals from the reverse signals are retained.

* The two averages must be mutually exclusive

To put it bluntly, in order for the economy to thrive, goods and services sold by companies that provide services for these companies must be purchased. Investors should be aware of the costs for these two companies if the market for corporate equity is very balanced. Therefore, the two averages must move in the same direction and reinforce each other. If one changes, it warns that a change is coming.

One important thing to understand is that there is no such thing as a good method for analyzing the market. The Dow Sign may still be good but it may be a sign that it may be too late to do so.

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