What are the differences between Dow's theory and wave theory? Which is better?
In the stock market, investors who like to do the trend will generally use Dow's theory and wave theory as reference. Dow's theory is the originator of trend analysis, and wave theory is the product of advancing with the times on the basis of Dow's theory. Today, let's talk about the differences between Dow's theory and wave theory.
There are several differences between Dow's theory and wave theory
1. They are divided into different trends:
(1) Dow's theory divides the change of stock into three trends: main trend, medium-term trend and short-term trend.
(2) Wave theory divides the change of stock into five trends, which is more detailed than Dow's three trends.
2. Different trends in duration:
(1) The main trend in Dow's theory generally lasts one year or more, the medium-term trend generally exceeds three weeks, and the short-term trend does not exceed six days.
(2) The five trends of wave theory generally have a short time.
3. There are different types of investors:
(1) Long term investors generally use the main trend judgment of Dow Theory, while short-term investors generally use medium-term trend and short-term trend as judgment.
(2) The five waves in wave theory are generally adopted by short-term investors, and the market changes are more rapid and timely.
4. The tools used to judge the trend direction are different
(1) Dow's theory generally uses the technical indicators of the moving average, brin belt and KDJ index to judge the trend of different trends and tell investors to buy and sell.
(2) Wave theory generally uses calculation to judge the trend. For example, the golden section principle is used to calculate the callback position of different waves. Generally, the first, third and fifth waves are listing waves, and the second and fourth waves are descending waves.
5. The range of application and the number of falling waves are different:
(1) In the bear market, the trend of Dow's theory has three waves of downward trend, while the wave theory has only two waves of downward trend.
(2) Dow's theory applies to the whole business cycle and index cycle, while wave theory applies to freely traded assets, claims and commodities.
Through the above comparison, it is not difficult to find that Dow's theory is more suitable for long-term investment, and the wave theory cycle is short, which can timely capture the short-term investment of market changes.