What You Should Know About the Dow Theory
The Dow Theory, created by Charles H. Dow, is a collection of theories that come together to form an idea about how financial markets move over time. While it's most commonly used in technical analysis, long-term investors can use the Dow Theory to help spot buying opportunities and chances to lower their cost basis for particular investments. The Dow Theory has six main parts to it.
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One of the underlying assumptions of the Dow Theory is that markets operate efficiently. In other words, all stock prices are based on all available information about the company. A company's earnings, management, competitive advantages and weakness, and everything else is factored into its price, regardless of whether an individual investor knows any of that information.
Source Fool.com
