There are four fundamental principles of price behavior that consistently apply across all time frames and markets, providing the foundation for traders to develop systematic approaches; these principles, originally highlighted by Charles Dow, form the basis for effective trading patterns and systems.
Principle One: A Trend Has a Higher Probability of Continuation than Reversal
Principle Two: Momentum Precedes Price
Principle Three: Trends End in a Climax
Principle Four: The Market Alternates between Range Expansion and Range Contraction