The Dow theory was developed in the late 19th century by Charles H. Dow. The theory expresses his ideas on price action in the stock market. Charles also invented the famous stock market index known as the Dow Jones Industrial Average (also known as the Dow). The Dow is price weighted and its value is affected by the performance of the most prominent companies listed in the stock exchanges in the United States as well as macroeconomic factors. Most methods and indicators used in technical analysis are based on the Dow Theory. The Dow theory is made up of six principles: The averages discount everything This principle states that all the fundamental factors, economic, political, technological factors, future events and other important factors affecting price have already been factored in and priced into the market except for natural calamities such as earthquakes. The only remaining influence on the stock price is human emotion. The market has three major trends A...
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