What is Dow Theory? Understand in 5 minutes.

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Traders in the Forex market, 90% will be the price chart analysts with technical colleges. And in the price chart analysis, there are many theoretical techniques. But one of the most popular theories in the Forex market, including the stock market. I can not escape the theory of stars. The Dow Theory is the prototype of many theories related to technical analysis. It is called the original technical analysis of the graph is that it is. If no stars There may be no technical analysis in this day. And most importantly, the inventor of the Dow Theory is Charles H. Dow He is also the inventor. Price index in the analysis of the stock market of the United States first. It is quite interesting.

What is Dow Theory?

Dow Theory is the prototype theory of technical analysis. The Dow Theory Theory is Charles H. Dow, who believes that Elliott Wave theory is the theory. The one that broke the theory of stars. Elliott Wave theory is further deepened. If interested or know-wave Elliott Wave Theory can see the article, ” Elliott Wave is (Elliott Wave theory to understand simple) “.

The theory of Dow Theory believes that the decline in stock prices is like the sea. When a stock is in a uptrend, the upside trend will be longer than the down trend. And the stock is in the downward trend, the distance of the downward curve is longer than the uptrend. It is similar to the sea wave when the water up to the sea.

The Dow Theory has divided the trend of price into 3 groups according to time.

Primary Trend

Primary Trend Big Trend or Long Term Trend Typically, this trend will take more than 200 days. Occasionally, this trend period can last up to 4 years. The trend looks like a general trend divided into 2 trends.

  • Uptrend New highs are higher than old highs and new lows are lower than old ones. The period of price appreciation is longer than the period of price decline.
  • New down trend below old high and low new low below old low. The period of price volatility lasts longer than the period when the price has risen. (Opposite to up trend)

The trend I wrote in the article entitled ” What is the trend? Get to know Uptrend,Downtrend, and Sideway.“But in theory there is no Sideway trend.

2. Intermediate Trend Secondary Trend

Intermediate Trend, secondary trend or mid-term trend. It looks like a Primary Trend, a big trend or a long term trend. The only trend term is the trend. Intermediate trend secondary trend or medium term trend will take from 3 weeks can be up to several months at all.

3. Minor Trend Sub-Trends

Minor Trend, sub-trend or short-term trend. It looks like Primary Trend, Big Trend, and Intermediate Trend. The only trend period is the trend. Minor Trend, sub-trend or short-term trend will take no more than 3 weeks.

 

The market is up and down.

The market conditions in the theory of stars. The market will be divided into two market conditions: Bull Market (Bull Market) and Bear Market (Bear Market)

 

Bull Market (bull market) or upward trend

Bull Market (Bull Market) refers to a market that is in a uptrend or Uptrend. The cause is called the Bull Market or bull market. Gore Or gore up the price. Many people think of the bison. The bison has a gore. That way the price is like a bull bender. It is the origin of the word “Bull Market or bull market”.

The Bull Market (bull market) or the upward trend will have three periods together.

  1. Accumulation Phase means the first period that price is the beginning of the uptrend. The stock price may be sluggish or down. Many people may start to buy stocks to keep in the long term. Because the stock price has come down. If you buy shares in this period to get the stock price. But many people do not dare to buy because they do not think the stock price will come up.
  2. Stock hoarding Participation Phase means after good news comes into stock. People are buying more shares. This is different from the first phase. “Period of stock accumulation (Accumulation Phase) “clearly. During this period, many people may begin to see that prices are on the upward trend.
  3. Excess phase means stocks have moved up for several consecutive days or moved higher after the past two stages, Accumulation Phase and stock hoarding. (Participation Phase) until this time. A lot of people started to agree that this was a trend up. People make parades to buy a lot. The price may rise or high. When the price is high enough. Some people started to sell shares to make profit. As a result, prices have been falling down, and when prices have dropped. It may be that some people are afraid and then sell the same. These causes may be the cause of the upward trend.

Bear Market (bear market) or downtrend.

Bear Market (Bear market) refers to a market that is downward trend or downtrend cause is called Bear Market or bear market because bear’s behavior is. Bringing hands with sharp nails down. Slap the victim down Or to slap it down. Many people think of the bear’s behavior. The price has fallen down like a bear. It is the origin of the word “bear market”.

Bear Market (bear market) or downtrend has 3 periods.

  1. Distribution Phase means when the stock price has risen to a price higher than the true price. This is a period when a lot of people are selling for profit. This term is affected by the term “Excess Phase”.
  2. Panic Phase This phase is the period after the distribution. The distribution phase is different from the distribution phase. But this time, a lot of people started to make their way to sell more than the distribution period, and some investors began to take a stop loss because they thought that the price would not go up.
  3. Gathering time (Consolidation Phase) at this stage a lot of people who know that this is a downtrend. There are a lot of people selling stocks to take profits, Take Profit, and stop loss. This period is the period when the stock price is falling.

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