Have you ever heard of the expression “news travels fast”?

It can be a really annoying situation sometimes, but it can also be extremely useful at other times. Today, we’re going to look at how it proves to be beneficial for the markets.

So, we already know that to trade the markets, you need to stay informed. But have you ever thought about what happens when thousands, if not millions, of traders get access to the same information at the same time?
They react.
They adjust their market positions accordingly.

So, if the news is good, they might buy more stock; if it’s bad, they might get rid of the stock, or they might deem the news insignificant and choose to hold their stock.

But whatever they choose to do, it is guaranteed to be reflected on the stock market prices as they rise, fall, and remain unchanged.

Dow’s first principle operates on the theory that the indices already include everything because they reflect the cumulative activities of thousands of investors simultaneously.

This means that the indices automatically reflect performance, market sentiment, inflation, trends, and other metrics because the investors already took such information into account.

In other words, Dow believed that you don’t need to study balance sheets; you can just analyze the price movements.

To sum up, the averages take into account past and present information, as well as future expectations. Although the markets cannot predict force majeure events, they can instantly discount them and incorporate them into the price.
Therefore, all you need to do is learn how to read the price charts!