Revisiting the Strength of Dow Theory in Assessing Stock Price Movement
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| Title | Revisiting the Strength of Dow Theory in Assessing Stock Price Movement |
| Authors | |
| Abstract | Abstract:An endeavor to sketch the starting point of technical analysis would inexorably lead to Dow Theory. Despite more than 100 years old, Dow Theory continues the basis of much of what is recognized now-a-days as technical analysis. The Dow Theory holds that there are three components in the movement of stock prices. Dow Theory stands upon the philosophy that the market prices reflect every significant factor that affects supply and demand - volume of trade, fluctuations in exchange rates, commodity prices, bank rates, and so on. In other words, the daily closing price reflects the psychology of all players involved in a particular marketplace or the combined judgment of all market participants. The target of the theory is to find out changes in the major trends or movements of the market. In view of above discussion, the present article tries to revisit the strength of Dow Theory in assessing stock price movement. Even though, there are weaknesses in Dow Theory, it will always be important to technical analysis. The ideas of trending markets and peak-and-trough analysis are found constantly within technical writings and ideas. More important in Dow Theory is the idea of emotions in the marketplace, which remains a characteristic of market trends. The basic facets of Dow Theory continue to remain functional and applicable to variety of situations and outcomes. |
| Publisher | World Science Publisher |
| Date | 2012-11-22 |
| Source | 2167-6348 |
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