1. Exploring the Basic Trends of the Stock Market  

Simply put, Dow Theory is an investment theory that studies and analyzes the fundamental trends of the stock market.  

The stock market is like an organism—it is alive and dynamic. No living entity can exist independently without being influenced by external factors. Just as humans rely on oxygen, sunlight, water, temperature, and food to survive, changes in these factors affect health and vitality. Extreme heat or cold, insufficient sunlight, abnormal climate, or food shortages weaken vitality, while moderate weather, favorable conditions, abundant food, appropriate sunlight, and clean air enhance it.  

Dow Theory examines the overall "health" of the stock market. The stock market is an organic entity, similar yet distinct from casino gambling. In a casino, games like dice rely purely on randomness—factors like the dealer's health, casino temperature, or crowd size have no impact. In contrast, the stock market is influenced by countless external factors.  

The most direct influence on the stock market is economic fundamentals. The traded commodity in the market is stocks—companies with profit potential seek to go public, raising capital to strengthen their economic power and profitability. Stocks represent ownership; the more shares held, the greater the stake in the company.  

2. Studying Long-Term Market Fluctuations  

The fundamental factor behind a company's stock price movement lies in its strength—its ability or potential to generate profits. The greater the perceived potential, the more the stock rises. Conversely, if investors lose confidence, the stock price falls.  

But what affects a company's profit potential? Beyond its own strategies and management capabilities, the most significant influence is the broader economic trend. This trend can be observed through complex economic data, including GDP, CPI, inflation/deflation, technological advancements, demographic shifts, and industrial transformation. In today's globalized economy, international conditions also play a role. For example, a financial crisis can swiftly collapse even strong companies and stable economies.  

These economic factors shape market conditions. Listed companies, as key economic players, are both influenced by and influence these factors. Thus, stock price trends are swayed by economic fundamentals—both macroeconomic and company-specific.  

Dow Theory aims to study how these factors impact the market. With thousands of stocks, each has its own trend based on individual circumstances. Yet, an "invisible hand" shapes the broader trend, visible through indices like Hong Kong's Hang Seng Index or the U.S. Dow Jones Industrial Average.  

Dow Theory seeks to predict these fundamental trends, which are long-term—lasting years or even decades, aligning with economic cycles.  

3. Identifying Market Patterns  

Dow observed that market fluctuations follow a rhythmic, cyclical pattern. Dow Theory analyzes these ups and downs, helping investors understand and capitalize on these patterns for success in the stock market.