Saturday, 31 March 2012

ANALYSIS STOCK TRENDS, Chapter 4, The Dow Theory In Practice


Robert D. Edwards
John Magee

Chapter 3

The Dow Theory

At this point, the reader, if he has little previous knowledge of
the stock market, may be suffering a mild attack of mental indigestion.
The Dow Theory is a pretty big dose to swallow at one

We departed deliberately in the foregoing chapter from the
order in which its principles are usually stated, in an effort to make
it a little easier to follow and understand. Actually, not all of the
twelve tenets we named are of equal import.

 The essential rules are
contained in 2, 3,4, 5, 8,10 and 11. Number 1 is, of course, the basic
assumption, the philosophical justification for these rules. The
other points (6, 7, 9, and 12) furnish "background material," as the
news reporters might put it, which aid in interpretation. Theoretically,
one should, by strict adherence to the essential rules alone,
accomplish just as much as he could with the added collateral

But the utilization of Dow Theory is, after all, a matter of interpretation.
You may memorize its principles verbatim and yet be
confounded when you attempt to apply them to an actual market