The Origins of Technical Analysis: Dow Theory Explained
📈 Ever wondered where technical analysis really comes from?
It all started with Charles Dow, a journalist and co-founder of The Wall Street Journal, who introduced the world to a new way of reading the market: through price trends, not just fundamental value.
In this video, we dive into how Dow laid the foundation for what would later become known as Dow Theory — a system that categorized market movements into primary, secondary, and minor trends, giving traders a new lens to understand the market.
This shift from fundamental to technical was revolutionary — and it still shapes the strategies of traders around the world today.
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The origins of technical analysis can be traced
back to the late 19th and early 20th centuries,
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primarily through the work of Charles Dow — a
journalist and co-founder of the Wall Street
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Journal. Charles Dow was a pivotal figure
in the development of technical analysis,
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as he sought to create a systematic approach
to understanding market behavior. His work
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culminated in what is now known as the Dow
Theory, which laid the groundwork for many
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of the principles that technical
analysis still relies on today.
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Dow observed that market movements could
be categorized into primary, secondary,
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and minor trends, and that these trends
often reflected the overall health of
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the economy. Dow didn't necessarily invent
technical analysis as a standalone concept,
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but rather established the framework that
would evolve into the complex discipline
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we know today. His goal was to provide a
tool for investors to understand market
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trends and make informed decisions based
on patterns observed in the market data.
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This was revolutionary because it shifted the
focus from the intrinsic value of assets to the
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analysis of price movements, thus allowing
traders to anticipate future price changes.
