Using Dow Theory to catch trends. (technical analysis)(Trading Techniques)

Futures (Cedar Falls, Iowa), October, 1995 by Saitta, Alex

The Dow Theory outlines the principles of stock market behavior and is used as the basis for much of the technical analysis involving today's stock markets. The principles of market behavior outlined in the theory include the occurrence of price trends in waves, the reflection of market information on prices, the three degrees and phases of trend and the confirmation of a trend by volume. Today, the theory is still widely used to define a trend and create a trading system.

Many technicians consider Dow Theory the bedrock of technical analysis. Here's how to use the basic concepts to define a trend and create a trading ststem.

In the late 19th century, Charles Dow created what are known today as the Dow Jones Industrial and Transportation Averages. After...

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