(This month, we will resume updating technical posts and gradually launch subsequent system updates through Dow)
There are many theories of technical analysis, and Dow theory is one that cannot be avoided, no doubt about it.
1. Trend line analysis: Dow Theory emphasizes the importance of trends, and trend line analysis is its core content. By drawing trend lines, we can identify the main trend, secondary trend and short-term trend of the market, and determine the support and resistance levels.
2. Chart pattern analysis: In Dow Theory, specific patterns in price charts can provide predictions of price trends. Some common chart patterns include head and shoulders, double tops, double bottoms, triangles, etc. By observing the emergence and evolution of these patterns, future price trends can be predicted.
3. Trading volume analysis: Dow Theory believes that trading volume is one of the important indicators of price changes. By observing the changes in trading volume, you can confirm the continuation or reversal of the trend and judge the mood and strength of market participants.
4. Confirmation and cross-validation: Dow Theory emphasizes the confirmation and cross-validation of trends. When the market reaches a new high or a new low, and the trading volume also increases accordingly, the continuation of the trend can be confirmed.
5. Use indicators: Although Dow Theory is mainly based on price and volume data, it can also be analyzed in conjunction with some technical indicators. For example, moving averages can be used to smooth price data and identify changes in trends, and relative strength indicators can be used to determine overbought and oversold conditions in the market.
The basic principle
1. The average price includes and absorbs all factors.
2. The market has three trends.
3. The big trend is divided into three stages: accumulation, warming, and distribution
4. Multi-Indicator Resonance
5. Volume and price go hand in hand. Trading volume verifies the trend
6. Reversal signal
Technical analysis methods based on Dow Theory mainly include trend line analysis, chart pattern analysis and volume analysis. Trend line analysis is used to identify the support and resistance levels of the main trend and intermediate trend. Chart pattern analysis is used to identify specific patterns in price charts, such as head and shoulders tops and double bottoms, to predict future price trends. Volume analysis is used to observe changes in trading volume to confirm trends and judge the sentiment of market participants.
It should be noted that Dow Theory is a subjective analysis method that relies on the technical analyst's interpretation of price charts and trading data. In actual application, it can be combined with other technical indicators and quantitative models for comprehensive analysis to increase the accuracy and reliability of the analysis. At the same time, changes in market behavior and environment may make the effect of Dow Theory different. Therefore, investors should be cautious and combine other analysis tools and risk management strategies to make decisions.