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Dow theory was developed by Charles Dow in the 19th century, is based on demand and supply deciding the price movement in the stock market. The theory is about analysing line charts ,to take long  position during H.B,H.T (bullish) and  to create a short position during L.T,L.B (bearish), provided significant volume occured in both the cases
According to Charles H. Dow, the movement of market price in stock market can be determined based on understanding the demand and supply. When price of stock moves from highest bottom to highest top through a high volume then price is bullish meaning demand is excessively higher than the supply. Similarly if price moves from lowest top to lowest bottom through a high volume then price is bearish meaning supply is excessively higher than the demand.Â
From 19th century charles Dow derive the Stock Market movement based on Demand & Supply. Later part everyone accepted as basic method and called it as Dow Theory.
Dow theory is the oldest theory in stock market to predict the direction of price movement. Usually for Dow theory we need two years of daily line chart, to predict the price movement.
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