Second Tenet out of six basic tenets of Dow theory states that Market trend have 3 phases and these three phases which tells us about the beginning and ending of a particular trend, this also helps in making higher gains from stock market.
Now, we will discuss that market trend have 3 phases, all these phases are explained thoroughly with examples which can help you to understand the concept better, do read them carefully before implementing this theory in technical analysis of stocks.
Charles H. Dow was the co-founder of Dow Jones & Company.
Market Trend Have 3 Phases – Second Tenet
Following are the three phases of a market trend:-
- The Accumulation Phase
- The Public Participation Phase
- The Excess Phase
1. The Accumulation Phase: It is that phase of a market trend when experts and smart traders enters into the market with their strategies and all their strategies reflects to the price movements of stocks, this is the first phase of a market trend or starting or reversal of a market trend.
2. The Public Participation Phase: It is that phase of a market trend when people get reflections in price movements which is reflected by smart traders and they start following them directly or indirectly therefore by increase in demand and supply price movements sit on a particular market trend and continues that for a particular period of time.
3. The Excess Phase: It is that phase of a market trend when prices are at their excess levels weather it is an Uptrend or a Downtrend, here many traders books their profits by squaring off their positions, hence this phase also indicates the further reversal of current market trend as prices are already on their excess levels.
In the chart of State Bank of India (SBIN) posted above you can see that market trend have 3 phases and all the phases are labelled, if you still have any query then you can comment below, for further updates don’t forget to subscribe to our newsletter.