Charles Dow and Dow Theory: The Origin of Trend Analysis
The founder of The Wall Street Journal laid the foundations of technical analysis: markets move in trends that persist until they clearly reverse.
Trade a real day like Charles Dow
A real market day with the date hidden. Run the checklist on the chart, then buy, sell or stay out: the real candles answer.
Check every point of the list before you decide. Stay out if the setup is not there.
Who they were
Charles Dow co-founded Dow Jones & Company in 1882 with Edward Jones and Charles Bergstresser, launched The Wall Street Journal in 1889 and created the Dow Jones Industrial Average in 1896.
He never wrote a book. His ideas survive through his editorials, which William Hamilton and Robert Rhea later organised into what we call Dow Theory.
Principles and rules
1. Three trends
Every market has a primary trend (months to years), secondary reactions (weeks to months) and minor fluctuations (days).
2. Three phases
A primary bull market moves through accumulation by informed buyers, a public participation phase and a final phase of excess.
3. Confirmation
The averages must confirm each other: a signal in the industrials needs a matching signal in the transports.
4. Volume confirms the trend
Volume should expand in the direction of the primary trend.
5. Trends persist
A trend is assumed to be in effect until it gives a definite signal of reversal.
Key lessons
- Structure comes first: higher highs and lows define an uptrend.
- Do not mistake a secondary reaction for a reversal.
- Confirmation from a related market reduces false signals.
Strategies from this method
How to practise it
The Dow Theory strategy page turns these principles into rules. In Candlemind, mark the last two swing highs and lows before every trade and only trade with the structure.
Frequently asked questions
What is Dow Theory in simple words?
Markets move in trends with a clear structure of highs and lows, and a trend continues until that structure breaks.
Is Dow Theory still relevant?
Its core ideas, trend structure and confirmation, are part of almost every modern trend-following method.
Summaries and paraphrases of public books and interviews, for education. Not investment advice.