The 3 Pillars of Dow Theory – Break One and the Trend FailsGoldOANDA:XAUUSDParadise_NoirMost traders hear about Dow Theory but don’t truly understand that: A trend only truly exists when all three pillars agree. Break just one pillar, and the “trend” you see on the chart may be nothing more than an illusion. Here are the three “holy pillars” that determine every trend: 1. First Pillar: Price Trend – Price Action as the Foundation Dow made it very clear: “The market discounts everything.” Meaning every piece of news, expectation, fear, and sentiment is already reflected in price action. To identify the trend: Uptrend when: Higher Highs – Higher Lows (HH–HL) Downtrend when: Lower Highs – Lower Lows (LH–LL) If there’s no HH–HL or LH–LL? → No trend exists. → Any buy/sell decision is basically guessing. 2. Second Pillar: Volume – The Confirmation of a “Real” Trend A rising trend with weak volume → fake rally, pushed by “echoes,” not real money. A falling trend with exhausted volume → high risk of an aggressive reversal. Volume is the fingerprint of real capital flow. Strong uptrend → volume must rise Strong downtrend → volume must expand Weak trend → volume gradually decreases → early reversal warning If price moves one way but volume moves another → One of them is lying. And price usually ends up turning around. 3. Third Pillar: Inter-Market Confirmation – “No Market Moves Alone” This is the part most traders ignore. Dow believed: A trend is only valid when confirmed from multiple perspectives. In Dow’s era, this meant: – Transportation Index – Industrial Index Today, we interpret it more broadly: BTC rising? → Midcap altcoins or on-chain metrics must confirm. SP500 rising? → Nasdaq or the Dow Jones should move in the same direction. XAUUSD rising? → DXY or yields must show weakness. If one index rises while its “siblings” stay flat or move opposite →The trend is unreliable. WHY ALL 3 PILLARS MUST ALIGN Think of a trend as a house: - Price Action → the foundation - Volume → the steel structure - Cross-index confirmation → the supporting walls Missing 1 element → the house stands, but very weakly. Missing 2 → it collapses for sure. Have all 3 → the trend becomes strong, durable, and hard to break.