How to trade the Dow Jones Industrial Average

How to trade the Dow Jones Industrial Average

The Dow Jones is probably the most popular index in the world, featuring strong daily volume and including a broad exposure of very big companies.


The Index is a price-weighted one and includes 30 very prominent companies around the US. It was founded in the late 1800s and includes a current market cap of almost $11 trillion.


The Dow Jones moves in sync with other US indices including the Nasdaq and the S&P 500 and while it is not a true representation of the economy, it’s the go-to index for traders who are looking to get an idea of the overall corporate environment in the US.


The Dow Jones (Figure 1) is tradable in a variety of ways including CFDs, Futures, and even options. Aside from trading the index, traders can establish similar exposure to the stocks available in the index by buying or selling the individual stocks. This is a bit tedious and not recommended but the variety of ways to obtain the same exposure is appealing to the masses and gives them options, especially for those who are more into stock trading.

Figure 1


The Dow Jones is affected by a variety of factors including:


  • Monetary policy
  • Corporate environment and performance of companies
  • Economic conditions
  • Economic release
  • Sentiment and market feel


Some traders prefer short-term trading and are keener to enter and exit positions quickly. This is possible given the volatility in the Dow Jones and the appealing trading conditions. The best way to do this is by trading CFDs or futures.


On the other hand, holding long-term positions can also be profitable but may create bigger drawdowns and riskier conditions. This is only recommended for the long-term trader or someone who is looking to maintain a portfolio and could benefit from additional or varied exposure to US companies.


Always keep in mind that US Indices tend to periodically reverse sharply from the main trend. For example, the indices could be trending higher with the Dow Jones posting 300 points gains intraday, only to be down 100 points after 1 hour. This is highly common and for those who are short-term traders, they need to keep their stop losses and trading strategies in check.


With CFI, you can trade thousands of CFDs on Stocks, Forex, Commodities, Indices, and ETFs from one single platform. If you are new to the financial markets, you can start with a risk-free demo account and for the more seasoned traders, opening a real account is a straightforward process that requires very little time. CFI offers its clients many services and features including free daily webinars, dedicated account managers, daily technical reports, and highly competitive conditions that include fast execution and spreads from zero pips.


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The content present in this article reflects the opinions and views of the author and does not necessarily reflect the position of CFI. The material published on this blog is provided for informational purposes only and should not be considered as investment advice. The Company is not responsible for the decisions and choices of the investor who has full and free will to make decisions that they see appropriate upon the investor’s sole discretion.

Credit Financier Invest (Mauritius) Ltd is an award winning global financial markets provider with over 23 years of experience and regulated entities in several jurisdictions, focused on offering impeccable execution and trading conditions including very low spreads, professional services, dedicated support and powerful tools.
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Important Disclaimer:

We would like to remind that while we endeavour to provide best possible services, CFI provides execution only services and any information, reports, opinions, commentary or other materials he receives from CFI directly or from its employees or through any analytical tools provided to him or third party research provided to him from the Company shall not be deemed as investment advice and it cannot be relied upon to make investment decisions. The Client commits to make his own research and from external sources as well to make any investment. The Client accepts that CFI will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. The contents of any report provided should not be construed as an express or implied promise, as a guarantee or implication that clients will profit from the strategies herein, or as a guarantee that losses in connection therewith can, or will be limited.

Forex and CFDs are leveraged products that incur a high level of risk and a small adverse market movement may expose the client to lose the entire invested capital. The vast majority of retail client accounts lose money when trading in CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. The possibility exists that you could sustain a loss in excess of your deposited funds even if a stop loss is used and therefore, you should not speculate with capital that you cannot afford to lose and be aware of trading risks. Credit Financier Invest (Mauritius) Ltd provides general information that does not take into account your objectives, financial situation or needs. The content of this website must not be interpreted as personal advice. Please ensure that you understand the risks involved and seek independent advice if necessary.

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