Technical analysis is one of the basic and important factors to success in global Forex. There are a lot of theories that help traders to analyze and understand FOREX market trends and its movements.
The Dow Theory is a theory of currency technical analysis and mainly used by market traders in order to better understand the market for profitable trading. This theory has been used and still using by millions of traders because its principles continue to work remarkably effectively. This theory is also called “Know How” for stock market investing.
Dow Theory includes principles which are absolutely fundamental in the price movement and the last one is a complete reflection of all the forces of the market. At any time, any market information and forces are taken in account the amount of money («The markets know all”).
“Dow Theory reveals that:
- Price movements are trend («The trend is your friend”);
- trends are up classify trends (bullish), down trend (gritty) and flat (sideways).
- Price movements are historically repetitive («history repeats”), the result of repeated publications development of both models chart.
- Three trends: the longest (about 1 year) major, or primary, less sustainable (1 month and more) intermediate goals, or secondary, and relatively short (several days or weeks) low.
- The main trend is three stages: accumulation, distribution and run-up/run-down.
- In this way, the accumulation part, which is bullish market shrewdest traders enter new positions.
- When run-up/run-down period, most markets, finally “sees” the move and jump side.
- Finally, the distribution stage, keenest traders take revenue and close their positions, while overall trade is too slow down market.”
Dow Theory is a Technical Analysis and it is an essential part of the Forex education, as it focuses on price. You can trade successfully and earn big money in global market by learning Dow Theory. Beside it, there is also Fundamental Analysis which focuses on factors that are susceptible to influence financial markets by affecting supply and demand forces for a particular market.