A Brief Introduction to Dow Theory-Excerpted from Rhea, the author of Dow Theory.
Dow theory-the originator of technical analysis. Dow theory is the originator of all market technology research. Although he is often criticized for "reacting too late" and sometimes ridiculed by those who refuse to believe his judgment (especially in the early stage of the bear market), anyone who has a little experience in the stock market has heard about it and is respected by most people. But people have never realized that it is completely simple and technical. It is based on nothing else, but on the behavior of the stock market itself (usually expressed by an index), rather than the business statistics that basic analysts rely on. The formation of Dow theory has gone through decades. 1902. After the death of Dow, William P. Hamilton and Robert Rhea inherited Dow's theory, and sorted it out and summarized it in the process of writing stock market comments later, which became the theory we see today. Their work & gt < < Dow Jones Theory >>& lt& lt worth mentioning that Charles Dow, the founder of this theory, claimed that his theory was not used to predict the stock market, or even to guide investors, but a barometer reflecting the overall trend of the market. Most people regard Dow's theory as a technical analysis method-this is a very regrettable view. In fact, the greatest thing about "Dow Theory" lies in its precious philosophical thought, which is its whole essence. In all relevant writings, Rhea emphasized that "Dow Theory" is designed as an auxiliary means or tool to enhance the knowledge of speculators or investors, and it is not a comprehensive and strict technical theory that can be divorced from the basic economic conditions and the current market situation. In other words, it is a method to predict future price behavior based on the study of price model. The formation process of Dow Theory, which we generally call "Dow Theory", is Charles Dow. William Peter Milton and Robert Rhea have the same research results. Charles H. Dow (185 1- 1902) was born in New England. Founder of Dow Jones Financial News Agency in new york, founder and first editor of The Wall Street Journal. He is an experienced journalist. In his early years, he was instructed by Samuel Bowles, an outstanding editor of Springfield and the Party. Tao once worked in the lobby of the stock exchange for a period of time, and the arrival of this experience is somewhat strange. The late Irish Robert Goodbo (Quaker, the pride of Wall Street) came to America from Dublin. As the new york Stock Exchange requires every member to be an American citizen, Charles H. Dow became his partner. During the time when Robert Goldberg was waiting for American citizenship, Tao sat in the seat of the stock exchange and carried out various instructions in the hall. When Goodbody became an American citizen, Dao quit the exchange and returned to his more passionate journalism. Later, Dow established Dow Jones &; The company publishes The Wall Street Journal and reports financial news. From 1900 to 1902, Dao worked as an editor and wrote many editorials. To discuss the method of stock speculation, in fact, he did not systematically elaborate his theory, but only reported it piecemeal during the discussion. Charles Doyle founded the average index of the stock market-"Dow Jones Industrial Index" at 1895. When the index was born, it only contained 1 1 stocks, of which 9 were railway companies. It was not until 1897 that the original stock index was derived into two, one is the industrial stock price index, which consists of 12 stocks; The other is the railway stock price index. By 1928, the stock coverage of industrial stock index has been expanded to 30 kinds, and 1929 has increased the public utility stock price index. Dao himself did not use them to predict the trend of stock prices. Before the death of 1902, although there were only five years of data to study, his views had made considerable achievements in accuracy. All of Tao's works are published. Only by carefully searching in the precious archives of the Wall Street Bible can he re-establish his theory of stock market price movement. However, the late S.A. Nelson completed and published a book without disguise at the end of 1902-The Basis of Stock Speculation. This book has long been out of print, but it can be seen occasionally in second-hand booksellers. He tried to persuade Tao to write this book, but he didn't succeed, so he wrote all the expositions on stock speculation that he could find in. Among the 35 chapters in the book, there are 15 chapters (from chapter 5 to chapter 19) which are the commentary articles of the Wall Street Journal, and some of them are slightly abridged, including Scientific Speculation, Methods of Understanding the Market, Methods of Trading and General Trends of the Market: 1902. William Pitt Hamilton? (William Peter Hamilton) conducted research under the guidance of Dow, who was the best spokesman of Dow's theory at that time. After the death of Dao, Hamilton succeeded Dao as < < Wall Street Journal >> until 1929. He continued to clarify and improve the concept of Dao, mainly published in < < Wall Street Journal >> later 1922 and published the book "Stock Market Barometer", which concentrated the essence of Dao's theory and made it have more detailed content and formal structure. Hamilton added his own thoughts on many issues, including market manipulation ("in an important bull market or bear market period, positive forces will overwhelm market manipulation, which is incomparable to the latter". Speculation ("When speculation dies, the country dies") even includes government regulation ("If there is any lesson worth remembering by the public in the past decade, it is that when the government intervenes in a private enterprise, even if the purpose of the enterprise is to develop public utilities, the result will be incalculable losses and minimal gains." ) 。 Robert Rhea? (Robert Rhea) (Robert Rhea) (Robert Rhea) (Robert Rhea) is an admirer of Hamilton and Tao. From 1922 to 1939, he hardly worked in a hospital bed, and used their theories to predict the price of the stock market. Rhea made a great contribution to the "Dow Theory", and he added the concept of volume to the price forecast. & gt 1932 Barron magazine published a book, which is now out of print. In this book, Rhea extracts the research results of William Peter Hamilton, and puts forward many references that are helpful to understand the "Dow Theory". Later, in a book, Rhea showed that "Dow Theory" can stably and accurately predict future economic activities. In all relevant writings, Rhea emphasizes that "Dow Theory" is designed as an auxiliary means or tool to enhance the knowledge of speculators or investors, and it is not an all-round strict technical theory that can be divorced from basic economic conditions and market conditions. According to the definition, "Dow theory" is a technical theory; In other words, it is a method to infer future price behavior based on the study of price model. Dow theory reached its peak in the 1930s. At that time, The Wall Street Journal used Dow theory.
Write stock market reviews every day. 1929101On October 23rd, the Wall Street Journal published the article "The Turn of the Tide", correctly pointing out that the "bull market" has ended and the "short market" era has arrived. This paper is based on the prediction of Dow theory. After this prediction, the stock market crashed immediately, and the Dow theory became famous for a while. Dow theory was first used in the stock market to judge the rise and fall of the stock market and see the rise and fall of the economy, as a tool to speculate on the trend of the investment market. Tao put forward a proposition that has become the axiom of modern financial theory, that is, the total risk related to any stock includes systematic risk and non-systematic risk. Among them, systemic risk refers to those general economic factors that will affect all stocks, while non-systemic risk refers to factors that may only affect one company and have no or little impact on other companies. Since Dow Theory reflects the general objective laws of returns and risks in the investment market, more and more people have applied it to the investment market in recent years. The verified results in mature financial markets show that Dow theory is effective in forecasting price trends. To celebrate Dow Jones' contribution to investment market research, the American Association of Market Technologists awarded Dow Jones a Cohen Silver Bowl in recognition of Charles Doyle's contribution to investment analysis. Dow's theory is regarded as a barometer reflecting the stock market activities by today's authorities. Today, 65,438+000 years after the death of Dow, this immortal theory is still a powerful tool for market technologists. Working in Rhea & gt In his book, he discusses three extremely important hypotheses and five "theorems" in Dow Theory, which basically still apply today. However, we can't explain them on the surface.
Author Liu Huilun: Liu Huilun, a well-known domestic futures and foreign exchange investor, was born in Harbin, Heilongjiang, on March 1979. (Inventor of binary trading method) Binary trading method is a very successful trading technology in the market at present.