Dow Jones futures market and investment technique

Dow Jones US index

Dow Jones index or Dow Jones and Company is one of the major business and financial index companies in the world. Founded by Charles Dow, Edward T. Jones and Charles Bergstresser in 1896, followed by the founding of the Wall Street Journal in 1889 which remain to be one of the most influential financial publications.

The Dow Jones or more commonly known as the Dow is one of the oldest most watched indices in the world and also is responsible for monitoring famous companies like General Electric, Microsoft, Coca-Cola and Exxon.

What is Dow Jones?

Dow Jones & Company is a vast company and an index that houses the top 30 stocks of the world. It was an ideology of three different people, namely Edward T. Jones, Charles Bergstresser, and Charles Dow, that erected the financial index company in November 1882. Besides, they grouped with the reputed Wall Street Journal seven years after their first successful venture in 1889.

In those days, Dow was renowned for deciphering convoluted financial news to professional traders and the public. He had a benchmark concept providing necessary information regarding the finances to everyone that indicated the stock market's progress and movements. The thought catapulted into Dow Jones Industrial Average, also called DJIA. Besides the Dow Jones Industrial Average (DJIA) there are two other Dow averages namely: Dow Jones Utility Average (DJUA) and the Dow Jones Transportation Average (DJTA) which focuses mainly on railroad, trucking, shipping and airline industries.

Dow Jones & Company, Inc.

News Corp is the owner of the American publishing firm. Alma Latour, the CEO of the company, leads it. Currently, the company is publishing Mansion Global, Private Equity News, MarketWatch, The Wall Street Journal, and Barron's. These top publications offer dollops of information for financial traders that guide them to see through market troubles. It helps them make wise decisions.

History Dow Jones

After the foundation in 1882, Dow Jones was acquired by Clarence Barron in 1902. Those days, he was the leading financial journalist. He stepped in after the co-founder Charles Day passed away. Post Barron's time, his stepdaughters Martha Bancroft and Jane took the company's reins in their hands.

In 1929, the Dow Jones Industrial Average (DJIA) debuted with 30 stocks changing its stocks from time to time. The only remaining original company to be under the Dow is General Electric.

Until 2007, the Bancroft family owned around sixty-four percent share of the company. It effectively contained all voting stocks. After that, it became the subsidiary of a news corporation in a dramatic turn-around.

The agreement of US$5 billion, which is $60 per share, ended the 105-year-old supremacy of the Bancroft company on December 13, 2007.

In April 2020, after ruling the company for almost six years, William Lewis, CEO of Dow Jones, stepped down. It opened the way for Almar Latour to take over in May 2020.

The Dow Now

Although the Dow Jones only consists of a meager 30 stocks, some may say that the index couldn’t be of any value. This is a common misconception because the Dow Jones holds 30 of the most highly capitalized and influential companies in the U.S. economy.

Until now the Dow Jones index is still one of the most reliable and trusted index. It is the Media’s most referenced index in the U.S. Market because is remain a trusted indicator of market trends.
The DJIA still lives up to everyone’s expectation as reliable economic market indicator. As long as the Dow contains stocks from major companies during any given period, the Dow will remain to be a standard when it comes to financial indicators.

Dow Jones futures contract

Dow Jones futures confer the power to any trader to speculate and predict the downfall and rise of the broader stock market. Futures contracts like E-mini Dow allows any trader to invest in DJIA. It is among the most distinguished indices across the globe.

There are top 30 stocks listed from a wide range of nine distinct sectors, including consumer staples, industrials, to health streams. Experts find the Dow Jones index synonymous with the stock market because it decides which position other stocks would flow. It is even though S&P has 500 companies listed on it, but the aura and reputation which DJ enjoys are unmatchable.

That is the reason Dow index futures offers immense exposure to the US markets to investors.

Basics of futures trading on Dow Jones

A futures contract binds two parties in an agreement where they zero in on selling and buying the underlying assets at a price predetermined in the future. The seller has to follow the obligation of selling it and likewise for the buyer. In Dow, the value of the underlying asset changes with time. The process offers the opportunity of incurring losses or profits.

Financial markets like Dow Jones do not have a concept of physical delivery when trading in futures. However, in a few commodity futures like corn's bushels, one is supposed to seek delivery in a physical form.

In financial markets like the Dow Index, people can easily hedge and avert risks. Also, there is a cash settlement offered. Moreover, a trader is free to speculate on profits.

Trading timing for financial futures

The financial futures market runs for six days a week, unlike stocks or other markets that function for five days. That is, they work around the clock. Sunday to Friday kind of shift.

Trading hours of Dow jones in futures include:

5 pm (Monday to Friday), previous day—4:15 p.m. There is a halt of fifteen minutes; that is from 3:15 pm to 3:30 pm.

Interestingly, when the US stock markets get shut, even during that period, index futures continue their after-hours trading. When other markets are close, during those times, factors like geopolitical reason, information on economies, stir in some country, monetary policies, and different data make a difference in the market.

The index value during the regular US stock market transactions gets keenly observed and monitored by the DJIA futures.

How to trade Dow Jones with futures contract?

The DJIA futures contract that consists of sheer top 30 blue-chip shares put the investors and traders on the pedestal where the probability of profit booking is the highest. It looks after the broader market indices and, based on their prediction, arrives and offers the opportunity to traders for putting their bets. That way, it is the safest version of trading indices markets, precisely in the futures.

Besides, the bludgeoning leverage and substantial trading volumes have helped Dow Jones to propose massive popularity among the masses. So, it's the option that the US traders have in the priority while trading in the stock markets.

Interestingly, approximately two-hundred thousand E-mini Dow contracts go into the market for transactions.

Types of Dow Jones futures sizes

Right now, for traders to trade, there are two types of Dow futures available; the Chicago Mercantile Exchange (CME) and the Chicago Board of trade, also called CBOT. On DJIA, the E-mini Dow has a representation of $ 5 per tick.

Notably, the Micro-E-mini is ten times smaller than the size of E-mini. Also, it demonstrates the exhibition of fifty cents per point. The margin required is USD 550.

Additionally, the Dow Jones futures get listed quarterly. They come with expiration in different months. They include December, September, June, and March.

The delivery here gets made in the equivalent value of the index, which also means cash settlement. They are not paid in stocks, for an index is the compilation of numerous stocks.

Usage of leveraging in Dow Jones futures

Leverage is the most desirable feature available in the futures market of any index. For every E-mini Dow contracts bought by a trader, the value of every point on DJIA is USD 5. An investor can buy up to $5,500 of the E-mini Dow contract.

So, when an investor when the market is trading at 35000 and sells at 37000, then there is a direct profit of $10000 to the investor. That's the benefit of leveraging in the Dow Jones futures market.

However, the perils of losses may magnify in equal amounts. If the market witnesses a similar drop, the entire security money and extra would get wiped off. So, while trading through leverage, keep the alert mode every time.

Opening an account on futures trading for Dow Jones

Opening a trading account is an essential step for earning money in the financial market. Traders, depending on the origination and geographical areas, can choose online brokers like HFTrading, Oinvest, Brokereo, TradeATF, 101investing, and many others.

If you do not have a stock trading account, then get one. A trader can request and seek a permit for trading Dow Jones futures on the brokerage firm. There may be some charges or fees applicable, depending on the type of trading you try to initiate.

Considerations before choosing
• Look at the types of platforms available at the broker's disposal.
• If the customer care service is there, and how long does it take for grievance redressal.
• Check the types of tools, indicators, and charts provided by the broker.
• See if there is an availability of data and news feeds.
• Check educational courses and videos for understanding the market.
• Need to know whether the broker gets regulated and has licensing and registration numbers mentioned on its website.

These are some essential parameters that you need to look upon while trading on Dow Jones futures.

Futures trading plan and idea for trading Dow Jones

Once the broker gets selected, it is time to deposit funds and start with real-time trading by selecting an appropriate or compatible platform. Seek lessons to use it if you aren't aware.

Don't go hastily in an attempt to make quick bucks in no time. It may happen in fluke once or twice, but as history has it, such tricks make you lose all your deposits.

It is better to hire an expert while trading in a volatile market. In the meanwhile, you'll also get equipped in utilising softwares.

For in-depth learning, you can also choose a demo account listed as a feature on your broker. Also, put up your strategies to test on here and see how they would work in the real-time trading space. It gets crucial while trading in the futures market that poses enormous leverage to traders.

After getting the nerves of the market on a stimulator, it is the time to get an experience of trading Dow futures with real money. Once the strategy strikes, things are in place. Choosing it with immensely leveraged futures assets advances toward guidance.

Futures trading is supportive of going long or short. It does not come enveloped in strict regulations like other financial markets.

Like other futures contracts, if a buyer assumes the DJIA market would rise, they can buy more futures contracts, and if the contrary happens, they can exit the trade immediately or short it.

A trader can take a position month-wise as per the convenience of trading in futures trade. The one that is going to expire soon will witness higher volumes relatively than others.

How to close a position on futures?

Closing an open position does not require any hassle. If someone has bought ten E-mini Dow contracts, the trade will get close by selling the contracts on the same futures market. However, the date of expiration must be similar to them.

Notably, for closing the position, an individual needs to sell all contracts. If the position is opened by purchasing ten Dow Jones futures, then it is mandatory to short all of them at once for closing it down.

However, in case a person has more than one contract, then the position can be closed partially. For example, if a trader has seven contracts, out of which four are sold, three would still stay open.

Futures margins in Dow Jones trading

Once a position is opened, the account of the initial margin gets started from the beginning. For holding the position, one needs to have enough funds in the account. That is called the maintenance margin, which is lesser than the actual margin required for trading.

But if the value of the account plunges below the maintenance margin, then, in that case, the brokerage firm would send a margin call. Here, the trader would need to put additional funds in the account or liquidate trade positions. It will lead to the backup of the account to the necessary level.

What are the top 30 companies in Dow Jones?

Here are the top thirty companies or blue-chip stocks trading in Dow Jones:-
Merck, Microsoft, Nike, Apple, 3M, American Express, Home Depot, Amgen, Walmart, Boeing, Chevron, Disney, Dow, Goldman Sachs, Honeywell, Procter & Gamble, IBM, Intel, Johnson & Johnson, McDonald's, Salesforce, Travelers, JP Morgan Chase, Caterpillar, UnitedHealth, Visa, Cisco Systems, Walgreens, and Coca-Cola.

What are the ways to invest in Dow Jones?

For investing in Dow Jones, traders can use ETFs, CFDs, SPDR, and other methods.

Criteria required for getting a place in Dow Jones 30
• The reputation of the company must be on the horizon.
• Charm investors in large volumes.
• The demonstration of growth should be sustainable.
• The plurality of revenues must arrive from the United States.
• The headquarters of the company should be in the United States.

Words of wisdom

Dow Jones is a symbol of excellence when it comes to indices trading. Enveloping top stocks in its kitty makes it invincible in the market of uncertainties and volatilities. The Dow Jones futures market is a volcano of possibilities for investors and traders, which has no dearth of surprises and profit-making opportunities. From the average settlement price of 8,687.0833 in 1998 to 26,434.7596 in 2020, Dow Jones is living up to investors' expectations.