Does Dow Theory work?

Dow Theory is one of the oldest investment strategies. Matthew Partridge explains how it works, and whether it is still worth following.

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Is a shipping slump a sell signal?

Many market-watching systems claim to provide a foolproof "signal" as to where the stockmarket is going next. One of the oldest is Dow Theory, which evolved from the writings of Charles Dow the founding editor of The Wall Street Journal and William Peter Hamilton, his successor. At heart, Dow Theory is a trend-following system. You buy when the market is in a rising trend, and sell when it is falling.

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Dr Matthew Partridge
Shares editor, MoneyWeek

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

Follow Matthew on Twitter: @DrMatthewPartri