Trade the Dow Jones Online

Trade large-cap US stocks via our US30 CFD

Trade the Dow Jones Industrial Average with a trusted ASIC broker based in Australia. Gain access to live market prices of the Dow Jones, one of the oldest indices in the US and a focu on large-cap equities.

Test your trading skills with a fast execution broker with STP (straight through processing) with FXTRADING.com.

A Primer on the Dow Jones Industrial Average

The Dow Jones Industrial Average (DJIA) is commonly referred to as the Dow Jones, or simply the Dow.

One of the oldest indices from the US, it remains a traders favourite whilst offering a slightly alternative approach to North American equity markets alongside the S&P500 and Nasdaq-100.

  • Established over 120 years ago
  • Represents the 30 largest listed companies in the US
  • The index is a price-weighted
Read More

Established in 1896
Approaching the turn of the century, the Dow Jones Industrial Average was launched by the famed American journalist Charles Dow, who was also behind the financial publication the Wall Street Journal.

Having endured two world wars and 20 recessions, the Dow has certainly seen some market action although it is actually the seconds oldest index, behind the Dow Jones Transportation Average which was launched exactly 100 years before the Nasdaq-100 in 1885.

Represents the 30 largest listed companies in the US
The name of the index is a little misleading as it is no longer representative of the industrial sector. At the turn of the twentieth century (early 1900’s), transportation and industrials made up the bulk of the US economy. Yet over the decades the American economy has progressed significantly away from ‘industrials’ yet, for the sake of history, the index has kept its original full name.

Currently there are only four ‘industrial’ stocks in the index out of 30 current constituents:

  • Apple Inc
  • UnitedHealth Group Inc
  • Home Depot Inc
  • Goldman Sachs Group Inc
  • Microsoft Corp
  • Visa Inc
  • Mcdonald’s Corp
  • Boeing Co
  • 3M Co
  • Johnson & Johnson
  • Caterpillar Inc
  • Walmart Inc
  • Procter & Gamble Co
  • International Business Machines Corp
  • Walt Disney Co
  • Travelers Companies Inc
  • JPMorgan Chase & Co
  • Nike Inc
  • American Express Co
  • Chevron Corp
  • Merck & Co Inc
  • Raytheon Technologies Corp
  • Intel Corp
  • Verizon Communications Inc
  • Cisco Systems Inc
  • Coca-Cola Co
  • Exxon Mobil Corp
  • Dow Inc
  • Walgreens Boots Alliance Inc
  • Pfizer Inc

 

The index is a price-weighted
Unlike most modern indices, DJI is not weighed by market capitalization. Instead it uses price-weighted mechanism to calculate its value.

This means that as that the most expensive stock in the index (currently Apple Inc) has far greater influence on the index performance compared with the cheapest stock (Pfizer Inc) which currently trades at around 1/10th of Apple’s share price.

How Can You Trade the Dow Jones Index?

As the Dow Jones itself is not a tradable instrument, traders use derivatives of the index to speculate on it. As CFDs (contracts for difference) are a form of derivative, FXTRADING.com offer access to the Dow Jones via their US30 CFD.

By placing a bet via a CFD, the trader does not get locked into a contract to take a future delivery, and neither do they own the underlying market. Yet they still gain access to live market prices and the ability to trade long (buy) or short (sell) the market.

Read More

Long example: Dow Jones (US30 CFD)
A trader buys 10 contracts of the US30 CFD at USD 26,130

  • If the price rises to 27,500 the trader could exit for a profit around $13,700
    • (# contracts x contract size) x (exit price – entry)
    • (10 x 1) x (27,500 – 26,130)
  • If price falls to 25,250 the trader could exit for a loss around -$8,800
    • (# contracts x contract size) x (exit price – entry)
    • (10 x 1) x (25,250 – 26,130)
  • A 1% margin requirement with 100:1 leverage requires $2,613 of capital
    • (# contracts x contract size x price) / leverage
    • (10 x 1 x 26,130) / 100

 

Short example: Dow Jones (US30 CFD)
A trader sells 5 contracts of the USTEC CFD at 23,000

  • If the index falls to 22,000 the trader could exit for a profit around $5,000
    • (# contracts x contract size) x (entry – exit price)
    • (10 x 1) x (23,000 – 22,000)
  • If the index rises to 24,000 the trader could exit for a loss of around -$5,000
    • (# contracts x contract size) x (entry – exit price)
    • (10 x 1) x (23,000 – 24,000)
  • A 1% margin requirement with 100:1 leverage requires $1,150 of capital
    • (# contracts x contract size x price) / leverage
    • (5 x 1 x 23,000) / 100

 

Costs associated With CFDs

Spread:
The spread is a nominal cost to enter a trade and is the difference between the bid and ask price (spread = bid – ask). As the spread is charged at trade entry, trades will be opened with a slightly negative balance until the market moves enough in your favour to cover the spread.

Spreads can be viewed within MT4’s market watch window (right mouse click and tick ‘spread’ to open the column). They can also be viewed directly on the chart by activating bid and ask prices within the MT4 option.

Swaps:
Calculated daily after market close, swaps are either a debit or a credit applied to your open positions. Based on the Federal Reserve’s interbank rate, the US30 CFD calculates swaps in USD.

The rates are variable and can be a credit or debit depending on the underlying rate and whether a trader is positioned long or short. To view swaps, go to the market watch window, right mouse-click and select “Specification”.

Market Drivers for the Dow Jones

There are many drivers to each market and stock market indices are no exception. Below are some of the more important market drivers to be aware of.

  • Liquidity
  • The Federal Reserve (Fed)
  • Economic data
  • Risk-appetite
  • Earnings Season
  • Share buybacks
  • Options expiration
Read More

Liquidity
Liquidity refers to how easy an asset is to buy or sell. A highly liquid instrument like a currency pair can be bought or sold easily and tends to have low transaction costs. Whilst an illiquid asset such as property takes much longer to finalise a transaction and the costs can be much higher.

If we find central banks like the Federal reserve are pumping liquidity into the financial markets, it effectively makes it easier for investors to buy and sell tradable instruments. This therefor can be supportive of the stock market. And explains why traders monitor how much liquidity the Fed are injecting or withdrawing from the market, by following updates on the Fed balance sheet and the US M2 money supply

The Federal Reserve (Fed)
If liquidity is the lubricant to help markets function, the Fed is the one holding the pump to make it happen. The Fed aims to control inflation through policy tools which usually results in them injecting or withdrawing liquidity from the financial systems.

Therefore, traders keep a close eye on what Fed members say and what they do on their monthly FOMC meetings as it can have a direct impact on markets such as equity indices.

Economic data
Macro-economic data such as PMI surveys and consumer surveys help investors assess which direction growth (GDP) could be headed. If they suspect growth will expand, this is seen as a positive sign by sign by share investors and can be supportive of shares prices. Conversely, if growth is expected to falter it can weigh on equity prices.

However, it’s not always so straight forward. If data becomes so ugly that the Fed stimulate the economy aggressively, the markets can sometimes look past the weak data and send equities higher if they feel the stimulatory measures offset the data. This is exactly what we saw in March 2020 after the covid-19 pandemic brought global trade to a standstill, as the Fed’s record-breaking stimulus measures marked the low and subsequent rally in equity prices.

Risk-appetite
During times of uncertainty, investors can be known to ‘de-risk’ and sell equities and buy safe-haven assets such as gold or the Japanese yen. Conversely, the opposite is true. If investors are more confident about the economy’s future they move away from safe haven assets and into equities. Index CFDs such as the US30 are the ideal vehicle to trade risk sentiment.

Earnings Season
The majority of US companies release their earnings reports quarterly, and it is the clusters of earnings reports which can have the greater impact on an equity index. As mentioned above, the higher the price of the stock, the greater impact it will have on the index. Therefor Dow Jones traders may would want to pay close attention to the top five or ten stocks in the index, ranked from the highest price. Currently in the top five by price are Apple, United Health, Home Depot, Goldman Sachs and Microsoft.

Share buybacks
This is where a company reinvests within itself and buys its own stock with spare cash. Whilst the practice has been around for decades, it has continued to draw scrutiny as it is seen as artificially inflating the share price, whilst increasing effective stock ownership of large investors as they are reducing the shares outstanding. Still, if enough companies are engaging in this practice, it adds a pillar of support to the index prices to help it trade higher.

Options expiration
We will steer clear of discussing the mechanics of options trading, but for index traders it is prudent to be aware that options expiration dates can instil volatility to the relevant index. This is of more importance to intraday traders as the volatility will be relatively high for their timeframe. Yet useful for traders of higher timeframes to also be aware of.

Traders should also be aware of ‘triple witching’ days, which is when three types of potions expire on the same day (stock options, index futures and index option contracts). Ultimately this can lead to a greater level of volatility.

Seasonality and the Dow Jones

Seasonality in markets refers to their tendency to outperform or underperform throughout certain periods of the year. Whilst commodity markets such as crops will be impacted by weather (eg. Droughts or floods), equity markets also show a degree of seasonality. That said the drivers would clearly be different.

Two popular examples are “Santa’s Rally” and “Sell in May and go away”.

Read More

Santa’s Rally:
It is not uncommon to see equity markets rally into the year end, with the bulk of the move occurring in the week or two before Christmas. It can partly be explained by fund managers squaring up positions for the year, meeting quotas or even reinvesting their annual bonus.

However, this tendency is not a hard and fast rule. For example, in December 2018 the Dow Jones closed -8.9% lower and December has been bearish three of the past five years.

Sell in May and Go Away:
This is a well-known saying from Wall Street which usually resurfaces around April each year. Whilst the title may sound like a suggestion to get short in May, it may actually be suggesting to step-aside from equity markets are we enter a period of underwhelming returns.

Historically June has been a poor month for the Dow Jones but, if an investor had shorted at the end of April this year, they’d have watched the Dow close over 6% higher in May.

Monthly close statistics for Dow Jones:

Between January 1990 and December 2019 (30 years)

  • November has produced the highest average return of 1.95%
  • April, July and November have produced the highest “win rates” (bullish closes) of 73.3%.
  • June is the only month of the year with an average negative return and win rate below 50% (at 43.3%)
  • October has provided the largest monthly high to low % range overall, with an average return of 1.5%

Why Trade the Dow Jones?

  • Trade long and short
  • Suitable across multiple time frames and trading styles
  • Trade a broader yet refined view of the US economy
  • Hedge an ETF or a portfolio of equities
  • The Dow can be used as a proxy for risk
Read More

Trade long and short
Don’t restrict your trading to one direction. Trade the Dow in both bullish and bearish markets with FXTRADING.com.

Suitable Across Multiple Timeframes and Trading Styles
Due to the plethora of market drivers, volatility is never far away from the Dow. This makes it a viable instrument for intraday traders, HFTs (high frequency traders), swing traders and longer-term investors.

Trade a Broader Yet Refined View of the US Economy
Speculating on the Dow allows you to take a positional view on the US economy yet refine your focus to large-cap stocks.  US indices share a very tight, positive correlation, yet there will always be a strongest and weakest performer.

Hedge an ETF or a portfolio of equities
If an investor is trading an ETF of the Dow yet they want to mitigate risk from the position without closing it, they can use a stock market index CFD such as our US30 to hedge their position. Due to the higher leverage and low margin requirements, it will be a cheaper alternative to a futures contract or simply hedging with the ETF.

The Dow Can Be Used as a Proxy for Risk
When investors embark on a flight to safety and purchase safe-haven assets such as gold, indices such as the Dow tend to suffer and may provide bearish opportunities. Yet when appetite for risk returns, so can bullish interest in indices such as the Dow Jones.

Why Trade the Dow Jones with FXTRADING.com?

  • Trade stock market indices around the clock
  • Trading Severs Based in Equinix NY4 Data Centre
  • No Dealing Desk
  • Generous levels of leverage and low margin requirements
  • Fast Trade Execution
  • Multiple deposit options
Read More

Trade Stock Market Indices Around the Clock
Whilst the Dow Jones market officially closes at 4pm New York, you can still access our Dow Jones CFD (US30) nearly 24-hours, 5 days a week. This keeps traders open to opportunities on breaking news around the globe.

Trading Severs Based in Equinix NY4 Data Centre
We have invested heavily in our trading infrastructure to offer fast execution for large and small traders. By having our severs located in New York, HFT (high frequency traders) and automated traders enjoy faster execution if used with a VPN in the same location.

No Dealing Desk
FXTRADING.com is an ECN broker which offers STP (straight through processing). This means there is no dealing desk to interfere with your trades or offer requotes, even during volatile times.

Generous levels of Leverage and Low Margin Requirements
With leverage available of up to 100:1 on our Dow Jones CFD (US30), margin requirements remain very-low which makes index trading the more accessible to traders of all levels.

Fast Trade Execution
Our top-tier liquidity providers, New York based trading servers and trading infrastructure helps us provide lightening quick trade execution.

Multiple deposit options
We allows our clients to fund in multiple currencies via several choices, including Skrill, Neteller, Poli and bank transfer.

  • Simply Fill In Your Details Below To Receive Your Trading Platform