Dow theory?

Discussion in 'Technical Analysis' started by marcus, Mar 25, 2006.

  1. marcus

    marcus Active Member

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    Could anyone tell me if the "Dow Theory" is still relevant today?

    Do the Industrial and rail averages still exist? The dow theory had 12 tenets and was used as a barometer to "gauge economic activity" (thats what the book says) and confirm a "change in trend" , it also describes at great length the characteristics of a bull and bear market and types of corrections.

    Do we have a similar theory for Indian markets? How do technical analysts forecast when a correction is imminent (like Prakash Gaba and others they predict or try to predict corrections 10 days in advance) is there a specific theory theses analysts apply (like the dow theory for US markets) to predict corrections and changes in trend with whatever varying degree of success.

    Can we apply the dow theory to Indian markets and if so what would be the Indian equivalent of the Industrial and rail averages?
     
  2. Traderji

    Traderji Super Moderator

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    Many argue that using any market-timing tool is a waste of time. Dow Theory Forecasts agrees that the best strategy for many investors is a buy-and-hold approach. However, there is always value in knowing whether the market's primary trend is bullish or bearish. No timing tool does a better job of keeping investors on the right side of the primary trend than the venerable Dow Theory.

    When using the Theory, it is important to realize that the Theory does not project how high or low primary market trends will carry. Also, by the time the Theory has signaled that a change in the primary trend has taken place, the market could already be well off its bull-market high or bear-market low. Still, while the Theory is unlikely to get an investor in at the exact top or bottom of the market - no timing tool can make this guarantee - it generally will help an investor capture most of any bullish move.
     
  3. sudoku1

    sudoku1 Well-Known Member

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