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Describe the theories explaining when shares should be purchased and when they should be sold.

      

Describe the theories explaining when shares should be purchased and when they should be sold.

  

Answers


Kavungya
1. Dow Theory
This theory depends on profiting of secondary movement of prices of a chart. The principal objective is to discover when there is a change in the primary movement.
This is determined by the behaviour of secondary movement but tertiary movements are ignored. Eg in a bull market, the rise of prices is greater than the fall of prices.
In a bear market the opposite is the case ie the fall is greater than the rise
In a bear market, the volume of the business being done at a certain stage can also be used to interpret the state of the market.
Basically, it is maintained that if the volume increases along with rising prices, the signs are bullish and if the volume increases with falling prices, they are bearish.

2. Hatch System
This is an automatic system based on the assumption that when investors sell at a certain % age below the top of the market and buys at a certain percent above the market bottom, they are doing as well as can reasonably be expected. This system can be applied to an index of a group of shares or shares of dividends companies eg Dow Jones and Nasdaq index of America.
Kavungya answered the question on March 12, 2019 at 05:50


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