Dow theory - The market discount everything

zswap

New Member
#1
Hello All,

I am novice to Technical Analysis and have just started learning about it. After some initial readings on Technical Analysis stuff, all I could infer is that Technical Analysis is all about predicting price of particular stock (of a company of course) by studying its historical data (data related to price movement in past).

While reading I came across of "Dow Theory" which everyone says is very must and a fundamental concept. The very first premise of dow theory states is "The market discount everything". What I could gather from the explanation given for it is - Whatever event has occurred in past, present or may be in future the price movement related to it is already there or already reflected in the stock price.

I had understood this concept (please correct me if I am wrong) but what I didn't understood is, What this concept has to do with prediction of price ? At the end of the day we are going to choose some tool, chart, or some analysis to predict the price so where does this theory comes in picture while concluding the future price of stock ?

I might sound stupid to some of the guys in this forum. But your explanation will still make some difference in clearing my confusion.

Thanks...
 

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