Dow Theory

A theory invented by Charles Dow and perfected later on. The Dow Theory initially stated that the stock market was the economy’s barometer was not developed for investor’s use. However, it became the basis for technical analysis.

The Dow Theory states that if the Dow Jones Industrial Average or the  Dow Jones Transporation Average makes a higher lower and a higher high and is confirmed by the other, then an uptrend has begun. And vice versa. It is also used to determine the beginning and end of a bull and bear market.

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