The Dow Theory

The Dow Theory is a method used to analyze stock market trends, based on the idea that the overall market moves in predictable phases. It suggests that the market has three main trends: primary (long-term), secondary (medium-term corrections), and minor (short-term fluctuations). Key principles include that the Dow Jones Industrial and Transportation Averages confirm each other's trends, and a trend is considered valid once confirmed by these indexes. The theory helps investors identify whether the market is in an upward, downward, or sideways phase, aiding in making informed buying or selling decisions.