Dow Theory is a form of technical analysis developed by Charles Dow in the late 19th century from his analysis of market price action.

Although it has been around for 100 years, its basic components still remain valid in today’s volatile and technology-driven markets.

The 6 basic tenets of the theory are:

  1. Markets discount everything: Current prices reflect all knowable information.
  2. The market has 3 movements: Primary (major trend), Secondary (retracements), and Minor (short-term swings).
  3. Market trends have 3 phases: Accumulation (informed early buying), public participation & distribution phase (astute investors leave).
  4. Markets must confirm each other: No important bull or bear market can take place unless different markets give the same signal.
  5. Volume must confirm the trend: Volume should increase in the direction of the trend of the major trend exists until a definitive signal.
  6. Proves it has reversed: This follows the physical law of motion which states that an object in motion continues to move until external