Long before candlestick charts and moving averages became standard, Charles Dow laid out a framework for understanding market trends that still underpins technical analysis today.
Trends Have Three Phases
Dow described accumulation (informed buyers entering quietly), public participation (the broader market catching on), and distribution (informed buyers exiting into strength). Recognising which phase a trend is in changes how aggressively you should be positioned.
Trends Persist Until Clearly Reversed
Perhaps the most practically useful tenet: a trend should be assumed to continue until there's clear evidence of reversal — typically a break in the pattern of higher highs and higher lows (or the inverse in a downtrend). This single idea is the ancestor of modern market structure analysis used throughout SMC and ICT methodologies.
We revisit Dow Theory early in our Advanced Technical Analysis course, because most modern trend-following tools are really just faster, more visual versions of these century-old ideas.
