Theory of Dow on the foreign exchange market Forex.

THEORY OF DOW ON THE FOREIGN EXCHANGE MARKET FOREX

In this article there will be explained some of the basic points of the theory of Dow Jones on the movement of the markets. The article only sums up what there are the fundamental points of the theory of this one a magnificent analyst of the economy with which the markets move. Because the theory of Dow Jones has importance on the foreign exchange market Forex, we have chosen it to do this brief but substantial summary.

The Dow theory on the functioning of the markets.

The Dow theory was invented in the year 1884 between the journalists Charles Henry Dow and Edward D. Jones. Between they founded the company Dow Jones and Company that is the name of the famous economic indicator of managerial averages known as the indicator Dow Jones.

The theory of Dow Jones has two important aspects: The first one is important for the fundamental analysis like strategy of investment in Forex. The second one is important for the Technical Analysis like strategy of investment in Forex the same way.

As for the first thing, that is the relating thing to the fundamental analysis, we can say that for the investment in Forex this index consists of three different economic indicators:

- The industrial index.

- The transport index.

- The utilities index.

Each of them reveals different types of information, which are of supreme importance for the knowledge of the market and to apply the strategy of fundamental analysis on having invested in Forex.


As for what it is important for the Technical Analysis like strategy of investment in Forex we have the following fundamental points in the market analysis.

The theory Dow Jones is the base of the Technical Analysis in Forex. With her all the fundamental bases are marked to invest in Forex with this one strategy. Some of the basic points of this theory are:

The basic budget of this one theory consists of the fact that as the companies grow and these take major preponderance, these companies will tend to increase his production and his actions to be quoted. On having presented before itself, it is done, the actions of the companies will be quoted and these will push the development of other economic sectors due to the growth of the production.

With base in this basic budget of the theory Dow of analysis of markets, there end the following points that full validity has to invest in Forex.

The price reflects the result of all the forces of the market: This is an important factor to be born in mind on having invested in Forex. It means that the price is a reflex of all the forces that acted on the market to take it to him as a result of all the movements.

The movement of the markets is based on tendencies: This theory speaks about two types of tendency: The upward tendency (in which the price tends to be quoted) and the downward tendency (in which the price tends to diminish his value).

Also one speaks about primary, secondary and tertiary tendencies, which classification depends on the validity of the tendency in a certain period of time.

The beginning of assertion: It means that to identify a tendency it is necessary that two economic indicators coincide that the tendency is downward or upward according to the case.

A tendency has validity until other one turns out to be opposite: it means that the only way of which a downward tendency perishes, is that there arises an upward tendency that it extinguishes.

Very well, these are the basic points of the theory Dow on the markets analysis. We hope that this information should be useful to them in his task of investing in Forex.

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