Jan 30, , 2: These returns cover a period from and were examined and attested by Baker Tilly, an independent accounting firm. This dedication to giving investors a trading advantage led to the creation of our proven Zacks Rank stock-rating system. There is no doubt that the Dow Jones industrial average is the widely watched index as far as the US equities are concerned.
Futures contracts on the Dow Jones Index provide an attractive combination of liquidity and leverage to day-trade the index or go for longer trend trades. Open an account with a commodity futures broker. Futures brokers are registered separately from stock brokers, and your current broker may or may not offer futures trading.
Check out several brokers in regard to the level of service provided, the type of trading software offered and whether or not the broker provides trading guidance or suggestions. Set up the trading software provided by the broker and study the characteristics of the different Dow Jones futures contracts.
Three sizes of futures contracts trade against the DJIA. The contracts are valued at 25, 10 and 5 times the index value, respectively. The larger the contract value, the larger the margin deposit required to trade a contract. Develop a trading system or select a trade signal source for the Dow Jones index. There are numerous strategies and systems available to trade futures on the stock indexes. You can try out new strategies using a practice trading account, which most futures brokers provide along with a live, real money trading account.
Do not start to trade futures with real money until you are consistently profitable in your practice account. Trade the selected Dow futures contract by using a "buy" order to open if you predict the DJIA will go up, or by using a "sell" order to open if you expect the stock index to decline.
When you enter an order, the broker requires an exchange-set margin deposit for each contract traded. Though trading of Dow Jones stocks is limited to the regular hours of the stock market, futures trade nearly round the clock. Although it tracks just 30 stocks compared to other indexes with hundreds or even thousands of component stocks, the Dow Jones accurately covers the overall value changes of the U. The value of the DJIA is based on stock prices, so the index value will only change when the markets are open and prices are moving.
Eastern time, Monday through Friday. During the market day, the value of the Dow Jones is updated every couple of seconds. When the markets are closed, the value of the index is based on the closing prices of the most recent stock market session for the 30 Dow stocks. Those prices before the market opening bell quotes you see on the news for the Dow Jones are the price of futures contracts that trade based on the DJIA's value. Futures trade almost around the clock during the work week, and when the stock markets are closed, the value of the Dow Jones futures change based on where traders think the index will open for the next stock market day.
Overnight news and financial events from around the world affect the nighttime and early morning futures prices. If that were the case, it would easily reflect on the trading volumes from the exchange for a particular index futures contract.
You can see that the trading volumes are nearly the same, which indicates that both these index futures are broadly popular trading instruments. You can see that the spread is 5 points for the Dow futures and 0.
With the above information, a futures day trader should be able to figure out which of these two stock index futures are more suited for their trading, which comes down to checking with your trading strategy, risk management style, trading capital, among other things will compliment one of the two stock index futures.
On the other hand, the price movement in the Dow is relatively smaller both in terms of the point move and the dollar value of the price movement on the charts. On the smaller end of the scale, telecommunications, basic materials, and consumer goods have a weighting of 1. The bottom line being that it is basically up to the trade on which of these two contracts are more preferable to trade. There is no doubt that the Dow Jones industrial average is the widely watched index as far as the US equities are concerned.
At the end of day it is all about how comfortable a futures trader is that matters. Free Trial Log In.