You will hear a lot about the Dow Theory as you travel through your trading career. Dow himself never actually used the phrase.That came later as analysts began to use the term.
I should back up here slightly and mention that in 1884 Dow published his first stock market average of 11 stocks.
From the original 11 stocks, there were some changes and rearrangements of the average, until he settled on 30 stocks which are now know as the industrial average and that is where we get the term the ‘Dow Jones Industrial Average’.
The actual theory is fairly straightforward to explain and sensible if you take the time to think about it.
I shall simplify it slightly, as we have not covered some of the terms yet.
