Dow Jones trading platforms let you trade the DJ Industrials Index (the ‘Dow’, ticker: INDU), one of the oldest stock market indices in the world. It was formulated in 1896 by Charles Dow and currently has only 30 component stocks. Although only containing a small number of stocks, they are some of the most valuable and profitable stocks publically traded in the US.
Our picks of the best brokers for trading the Dow Jones
You can use our comparison of the best brokers for trading the Dow Jones Industrial Average (DJIA/US 30) to see the key features offered by US30 trading platforms, including costs, spreads, minimum deposit, overnight financing rates and what types of trading accounts are available.
We have chosen what we think are the best Dow Jones trading platforms based on:
- over 7,000 votes in our annual awards
- our own experiences trading the US30 in the accounts with real money
- an in-depth comparison of the DJIA trading features that make them stand out compared to alternatives.
- interviews with the Dow trading platform CEOs and senior management
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
- 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.
Dow Jones Trading FAQs:
The Dow is not cap-weighted but price-weighted.
The biggest ETF based on the DJ Industrials Index is the SPDR Dow ETF (ticker: DIA).
You can trade the Dow through the brokers listed in our Dow Jones trading platform comparison.
Brokers who offer CFDs or OTC derivatives based on the DJIA call it Wall Street or US30 because of the cost of licencing the Dow Jones Index. Trading platforms that offer direct market access through Futures tend to call it by its correct futures contract name.