Technical Analysis of Stocks.What is Dow Theory?
Technical Analysis
Technical Analysis helps to describe and forecast changes in stocks prices by studying of the market data, In this phenomenon study of previous data of share prices and predict the future trends is known as Technical Analysis.
Technical Analysis done from four important factors-
1.)Price-When the price of any stock changes, its affects the demand and supply, the reflection of the price of the stock changes the attitude of the investors.
2.)Volume of Share-Price changes reflected to volume of transaction.If the price is high then the volume is low or price is low then the volume is high.
3.)Time-Share price movement is a role of time.its calculate for longer position or short position.
Tools of Technical Analysis-
Two things are important to check behavior of share market whether the share price will go down or up.
a.)Behavior of Price
b.)Share Volume
Many theories have been discovered for technical analysis, one of them is Dow Theory. Let us understand this a little easier.
What is Dow Theory?
The Dow Theory is one of the most famous and easiest technical tools.Its is originated by Charles Dow, who founded Dow Jones company. Greiner and Whitecomb assert that"The Dow Theory provides a time tested method of reading the stock market behavior.
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Dow Theory |
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Market Discount Everything |
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Market has three Movement |
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Price Action determines of stock |
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Price Volume Relationship |
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Average must confirm of Stock |
The some basic rule of the Dow Theory are as follow-
1.)Market Discount Everything-
Market analysis every thing for pricing as like past ,present or future price,its analyze market participant or demand and supply graph, this all thing is reflected the share price.
2.)Market Three Movements-
Market has three Movement.Primary Movement,Secondary Movement and Minor Movement.In Primary Movement studies last several years market trends.It can either be a rising or a falling trend.In Secondary Movement studies of 3 week to many month of stock market important bullish or bearish graph.In Minor Movement studies of daily price that form only intraday trading are called Minor Movement,minor movement data is not implement for long term forecasting.
3.)Price Action Determines the trends of stock-
Price Action determines means trends of successive rallies lead to peaks and bearish trends is marked by a series,the bottom and top points are marked on the graph by which the market trading strategy is created.
4.)Price Volume Relationship-
Price Volume relationship is very important term for technical analysis.Price changes is reflected to volume of transaction.If the price is high then the volume is low or price is low then the volume is high.
5.)Average Must Confirm of Indices-
As few indices or averages must be confirm each other,if the market is truly a measurement of future business conditions, the industry average and market average should by and move together.
Hope you understand this article,if there is any question related to this article, then you can ask and comment.
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