Why Dow Theory and Wave Theory Are Not Useful in Practical Trading

Hello, I’m a cat owner. Today I’d like to talk about trading theory. You often hear about "Dow Theory" and "Wave Theory," but while these theories have value as concepts, have you ever wondered how much they actually help in real trading? From my experience, theories are interesting as knowledge and understanding them can reveal the depth of trading. However, in order to actually make profits, these theories rarely directly aid trading. Today I’ll explain the reasons in detail.

### Difference between theory and practice

First, theory is simply an explanation of what happens in a sequential way. Studying theory is certainly important because it helps you understand the basic framework of trading. But applying theory directly to real trading is very difficult. Trading requires not only theory but also reading real-time market movements.

### Limits of Dow Theory

Dow Theory is a theory proposed by Charles Dow that describes the existence and persistence of trends. Indeed, looking at past data, markets often move in accordance with Dow Theory. However, the problem is how to apply this in real time. Markets are constantly changing, and every moment is different. Whether the trend indicated by Dow Theory will actually continue depends greatly on the psychology of market participants at that moment and external factors.

### The difficulty of Wave Theory