Dow Theory for the 21st Century: Technical Indicators for Improving Your Investment Results by Jack Schannep is a modern interpretation of one of the most foundational theories in technical analysis. Schannep, a respected market analyst and proponent of Dow Theory, translates this time-tested wisdom into practical strategies for today’s market.
The book begins by revisiting the original principles of Dow Theory, as formulated by Charles Dow, co-founder of Dow Jones and Company. Schannep elucidates these principles, explaining how they identify major market trends by observing the behavior of the Dow Jones Industrial and Railroad (now Transportation) averages.
What makes “Dow Theory for the 21st Century” unique is Schannep’s enhancements to the traditional Dow Theory. He proposes the “Dow Theory Plus,” which adds the S&P 500 as a third index to confirm market trends. Schannep also introduces a series of technical indicators to augment the Dow Theory signals, including moving averages, breadth indicators, and sentiment indicators.
These enhancements make the Dow Theory more adaptable to the contemporary market environment. Schannep demonstrates how his refined approach provides more timely buy and sell signals, reduces the risk of false signals, and captures a larger portion of major market moves.
Furthermore, the book provides a practical guide on how to implement the Dow Theory in trading and investing. Schannep illustrates how to interpret Dow Theory signals, set up trades, manage risk, and adjust strategies in response to changing market conditions.
“Dow Theory for the 21st Century” does not neglect the behavioral aspect of trading. Schannep underscores the importance of discipline, patience, and emotional control, guiding readers on how to overcome the psychological challenges that often derail trading success.
In conclusion, “Dow Theory for the 21st Century: Technical Indicators for Improving Your Investment Results” is a valuable resource for traders and investors seeking to enhance their market analysis and trading performance. By fusing classical wisdom with contemporary insights, Schannep provides a robust and adaptable framework for navigating the financial markets.