Best Dow Jones Trading Platforms (DJIA/US30) Compared & Reviewed

How can you trade the Dow Jones Index?

There are multiple financial products derived from the underlying DJ Industrials Index that you can trade with, including:

• Futures – buy a certain amount for a set period in the future
• Options – hedge or speculate through puts and calls
• Exchange-Traded Funds – funds that track the DJIA performance
• Investment Funds – funds that contain Dow stocks
• Spread betting – betting on the Dow Jones price movements
• Contracts for difference – trading based on the opening and closing price of  your position

Read the GMG Guide on Index Trading.

Why is the Dow Jones so popular for traders?

DJ Industrials is often seen as one of the barometers of Wall Street. Given its components, Dow is often seen as a ‘Blue Chip’ index. Investors and traders often like to trade this index:

• Dow offers good liquidity
• Dow has a long history, thus allowing investors to compare price movements easily
• Dow has been a good performer since 2009.

This Index is volatile enough to attract traders. Thus add liquidity of the index.

What moves the Dow Jones price up and down?

Stock markets are driven by a wide variety of factors, including some of the following:

• Macro factors (e.g. GDP, unemployment, business indicators etc)
• Monetary factors (e.g., Quantitative Easing, rates movements, yield curve etc)
• Technical factors (e.g., new highs)

If you are trading INDU short term, you will need to pay attention to news flow and data announcements because they can have massive impact on the index over the short term.

Another area to watch out for are Federal Reserve meetings and the release of FOMC minutes. Any change in interest rates beyond market expectations can cause violent swings in the SPX. For example, if investors were expecting a 0.25% hike but the central bank raised it by 0.5% – this may cause prices swing massively after the announcement.

Studying the reaction of the market to these factors are important.

Trading the Dow Jones using technical indicators

To trade the Dow profitably requires a good trading strategy, of which technical indicators may come in handy. Technical indicators include:

• Trend indicators like moving average
• Price action
• Oscillators
• Support & resistance levels (see how to trade with technical analysis)
• Patterns like breakout and reversals

For example, you may use the moving averages to judge whether the index is still trending or due for a reaction.

Another favourite indicator is a break of resistance or support levels. Look at the DJ Industrials ETF (DIA) below. It was clear that the breakout above the 275 key resistance last month resulted in a rally into 280 (see below). This resistance, now broken, may even convert into resistance.

Bear in mind, however, the different traders will gravitate towards different trading styles. Therefore you must find the technical indicators that best support your trading objectives.

Dow Jones index versus the S&P 500

For half a century after its inception, the Dow was the most-followed index because of its history and prestige. But as the US economy expanded massively after 1950, Dow’s thirty components gradually under-represented the economy. These days, investors tend to use the S&P 500 as the benchmark. Still, the Dow is a widely-quoted index.

Dow Jones alternative indices for trading

You can read about the major indices in our guide to the best indices for index trading.

• Standard & Poor’s 500 (S&P 500)
• Nasdaq (Composite and Nasdaq 100)
• Dow Jones Industrials (DJIA)
• UK FTSE 100 (FTSE 100)
• CAC 40 (France 40)
• DAX (Germany 30)
• European Stocks to Buy Now
• Japan 225 (Nikkei 225)
• Hong Kong (Hang Seng Index)