There are a lot of theories that you can study as part of your Forex education - but anyone wanting to learn Forex trading technical analysis, should look at Dow Theory.
Dow Theory is one of the most important trend following theories ever. Whilst today’s traders like to look at flavor of the month theories, nothing beats Dow Theory in terms of logic - and getting the odds in your favor, its been around for nearly 100 years and is just as important to day as it ever was.
Let’s see why Dow Theory will help you achieve currency trading success:
Predictive V Odds Theories
Many traders look for theories that claim to predict market movement in advance.
These traders are attracted to theories such as Elliot wave, Gann, and cycle theories – because they want a scientific theory that tells them where prices are going to go, problem is they don’t work.
The reason why is obvious:
If prices moved to an objective theory, we’d all know the price in ahead of time - and there’d obviously be no market!
There’s no way of predicting online currencies with scientific accuracy, it’s a myth and people who fall into this trap lose, but you can get the odds on your side.
Forex trading odds
If your trading signals give you more profits than losses, you can still make big consistent gains over time.
Charles H. Dow in an article in the Wall Street Journal in 1901 compared stock markets, to the tides of the ocean, - and the quote below sums up the theory:
"A person watching the tide coming in and who wishes to know the exact spot which marks the high tide, sets a stick in the sand at the points reached by the incoming waves until the stick reaches a position where the waves do not come up to it, and finally recede enough to show that the tide has turned. This method holds good in watching and determining the flood tide of the stock market."
Probability & Odds Making Them Work For You
It’s not just valuable for the stock market, for which Dow developed the theory - it’s an essential part of your Forex education.
Just like the waves of the ocean, we know that every market ebbs and flows, one way, and then back the other way. The problem is, we don’t know the exact spot they’ll turn - or the exact timing and it’s the same with forex trading
If we don’t know exactly when prices will turn, what’s the answer?
We wait for CONFIRMATION of the turn.
Dow Theory, is a theory of currency technical analysis, that doesn’t predict - but waits for confirmation which enables us to get the odds in our favor.
Currencies do move in repetitive patterns and Dow Theory allows us to spot the patterns with the best chance of success - and then trade them for profit.
Forget the Short Cuts to Success
Many traders think that making money in the online Forex markets is easy.
This is why these traders buy worthless e-books, and currency trading systems, for a few hundred dollars - and expect them to work.
The reality is these e-books and systems never work - and traders need to understand that Forex trading is simply an odds game and Dow Theory helps you play the odds for longer term currency trading success.
Dow Theory, an essential part of the Forex education of ALL.
If you want to learn Forex trading, and be a successful trader and profitable trader, then you need to learn Dow Theory – which are easy to understand, apply and make big profits with.
If you use Dow Theory correctly you join the elite 5% of traders who win consistently, in the world’s most exciting investment market.
In part 2 of this article, we’ll look at the logic of Dow Theory and the three phases of trends in more detail - and see why it works and why it can add a new profitable dimension to your currency trading strategy.
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