The concept of Dow Theory, developed by Charles Dow in 1902, is a fundamental principle in stock market analysis. It suggests that the stock market tends to follow a pattern of increasing prices over time, with the highest price reached at the midpoint between the low and high points of the previous trading day.
- Dow's strategy involves identifying the major trend, which is determined by the overall market direction. He then divides the market into three phases: a bull market, a bear market, and a neutral market.
- During each phase, he provides specific guidelines for buying and selling stocks, including setting stop-loss orders and using chart patterns to make informed investment decisions.
