Trends in the crypto industry narrow down to two key words, bullish and bearish.
A bearish market pattern is a downward / negative movement while an upward / positive movement is a bullish one.
Under both fundamental principles, they are an underlying idea behind grasping the crypto markets ‘ technical analysis.
Essentially, Dow Theory sums up the idea behind market trends.
There are four variables that support this theory’s fundamentals.
These are the following variables:
What is the Dow Theory?
Dow Theory is a business approach founded by Charles Dow, also known as the Technical Analysis Dad. It is still the basis of financial market technical analysis.
Dow Theory’s basic idea is that market price behavior represents all available information and there are three key patterns in the market price change.
To have a better understanding of technical analysis, it is essential to know the Dow Theory.
Dow Theory’s fundamental ideas are as follows:
- Throughout selling, the market takes everything into account. All present, future, and forthcoming data have been translated into the current prices of property.
- Type in anything that you want. Then click Quill It on the right to paraphrase your input.
- Price moves aren’t just random. More often than not, they follow trends and it can be either long or short-term.
- Instead of any single variable that causes a change in its value, market analysts concentrate on the price of a coin.
History tends to repeat itself.
Because of this, market behavior can be predicted as traders react with a particular pattern when presented in the same way.
The market offers all discounts
In other words, stock and index prices reflect all available information, and that which is unknowable is the only information that can not be represented.
The Efficient Market Hypothesis (EMH) is known as this.
The Dow theory relies on the principle of efficient markets (EMH), which notes that all available information is included in asset prices.
This approach is, in other words, the antithesis of behavioral economics.
Potential earnings, competitive advantage, management skills — all of these variables and more are valued on the market, even if not all of these specifics are known to everyone.
Even future events are discounted in the context of risk in more rigorous readings of this principle.
Three Primary Kinds of Market Trends
Markets experience primary patterns, such as a bull or bear market, that last a year or more.
We encounter secondary patterns within these larger trends, frequently acting against the primary trend, such as a pullback on a bull market or a rebound on a bear market; these secondary trends last from three weeks to three months.
Lastly, there are minor trends that last less than three weeks, most of which are noise.
Three stages of key developments
According to the Dow theory, a primary trend will go through three phases.
These are the stages of growth in a bull market, the stage of public involvement (or big move) and the period of excess.
They are called the phase of distribution in a bear market, the phase of public involvement, and the phase of panic (or desperation).
Averages must confirm
Originally, Dow had proposed the two averages when the U.S. was an increasing industrial power.
One would represent the manufacturing system and the other would reflect the economic movement of those goods.
The logic was that if there is production, the people who move around them should also benefit, and thus new peaks in the industrial average need to be confirmed by the peaks in the average transport.
The roles are changing today, but the relationships between sectors remain, and so is the need for confirmation.
Volumes uphold patterns
Dow claimed that volumes could validate price trends.
If high volumes followed the price movements, they would represent the ‘ real ‘ price movement.
Trends continue unless there are definite reversals
Dow believed that prices were moving in trends regardless of the day-to-day erratic movement and market noise that might have been witnessed in prices.
Trend reversals are difficult to predict until, due to the nature and severity of patterns, it is too late.
A pattern is believed to be in place, however, unless there is definitive evidence of reversal.
The Dow Theory’s tenets are only the iceberg edge when reading cryptographic maps.
Within the folds of countless variables, the possible future of the financial market is contained; below which are deeper viewpoints that characterize the market.
Look at this space for more tips on financial and cryptocurrency industry understanding.
Are you going to benefit from using Dow’s Concept in cryptocurrency trading?
Okay, that’s up to you entirely.
If you’re willing to spend time researching the concept, it can almost guarantee that you’re making a profit.