5 Technical analysis is a method used to evaluate the worth of a security by analyzing statistics pertaining to its market activity. Explain on Dow theory and its assumptions.Write complete information on Technical indicators.
Answer:-Explanation of Dow Theory and its assumptions
The Dow Theory was originated by Charles Dow, the founder of the Dow Jones Company and editor of the Wall Street Journal. The Dow Theory presumes that the market moves in persistent bull and bear trends. Dow Theory was originally used for market as a whole, but it is now used for individual securities as well.
Dow Theory recognises that it is the actions of traders in the marketplace responding to news that cause prices to change rather than the news itself, and that, once established, a market trend tends to continue.
The theory had originally focused on using general stock market trends as a barometer for general business conditions. It was originally not used to forecast stock prices. However, subsequent work has focused almost exclusively on use of theory.
The Dow Theory comprises the following assumptions:
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