The Teory of DOW

Most of what we know about technical analysis was born from the ideas of Charles Dow, Edward Jones and his partner, who works in the company Dow Jones & Company since 1882. These ideas were published in the Wall Street Journal and on currently accepted by most adherents of technical analysis, although most did not know the source. Dow theory is still dominate even though it has a lot of technical analysis is more complicated and high-tech.

I. the market takes into account everything.
All the things that can affect the supply and demand market reflected in market prices.

II. three types of trends (Trends).
According to Dow, trending up (uptrend) is a continuous rise to the top and down, while trending down (downtrend) is constantly up to the lowest point. Dow argued that the law of action and reaction that applies to the market is the same as for other physical objects, and this means that any significant changes is always followed by concrete returns.

Dow divides trends into 3 parts:

1. Primer (comparable with the tide, the continuous rise of the surface).
2. Secondary (proportional to the wave and represents correction feedback) from the first trend, usually up to 1/3, 2/3 or typically half that of previous trends change.)
3. Minor (ripple)-fluctuations in a secondary trend.

III. the primary Trend consists of three phases.
The Dow is concerned the primary trend, which is divided into three phases:

The phase Accumulated the most astute investors begin selling or buying the latest changes feel from the direction of the market.
-Participation phase by using technical analysis, most of the traders into the market following a price change that fast.
The phases of implementation of the new directions that are recognized and widely accepted and supported by economic news that generate speculative volume growth and all participants in the trend.

IV. Exchange Indices must be mutually confirm.
Dow stated that up to the curve of the Industrial index and the Standard & poor-(discourse on the Dow-Jones index) does not surpass the previous peak then there is no confirmation of the beginning and the continuation of the movement "bull" (ascending) on the market. Signals do not have to log on simultaneously but the more clearly a signal is considered to be increasingly little time underway among the signals they will be.

V. Trends reinforced by trading volume.
Trading Volume was enlarged or shrunk depending on the price trend towards the back or vice versa. Dow found this as volume indicators second stage. Signal-signal to sell or buy based on the closing price.

VI. Trends must be assessed continued until the emergence of signs of the opposite direction.
All the technical approach to analyze the market based on a simple idea, that trend will continue until the advent of the outside force that compels him to turn – just as in terms of physical objects bendak. Thus there are signals in the reverse direction to look for.