The Dow Jones Industrial Average
The Dow Jones Industrial Average, commonly just called the ‘Dow’, was historically the benchmark for US stock performance, although it has been replaced in the eyes of many investors by the S&P 500.
The Dow Jones Industrial Average is composed of only 30 stocks, and its constituents are determined by price rather than market capitalization. Find a list of constituents here.
What affects the value of the Dow Jones?
As with any share index, it is the price of the underlying shares that moves the price of the index. In this case, it is the 30 biggest listed companies in America.
Although traditionally, these would have been listed on the New York Stock Exchange, today they only need to be listed on one of the big US exchanges.
At the time of writing, some of the most expensive companies in the index were 3M, Goldman Sachs Group, IBM and United Health.
The performance of the Dow is driven by a smaller series of shares, even if these are some of the more expensive companies in the US.
Because the Dow has been measuring US stock prices since the 1890s, it has been through some of the worst crashes in US history, in particular the Wall Street Crash of 1929, but also the Black Wednesday crash of 1987.
However, the changing structure of the US share markets, e.g. across more than a dozen different exchanges, and the lack of liquidity in the share markets as buyers and sellers become more selective, means that volatility in the Dow and its underlying shares has increased in recent years.
The choice of whether to trade the Dow Jones or the S&P 500 largely boils down to individual preference, but some factors include the larger average market cap of Dow Jones constituent companies and the different price calculation methodologies.
You can trade the Dow Jones in a number of different ways, the most popular of which are as a futures or options contract, an Exchange Traded Fund, or as a Contract for Difference.
CME Group has an extensive list of futures products based on the price of the Dow Jones Industrial Average, and it is easier than ever for an individual to open an account with an approved broker to trade CME Group futures – simply ensure you have a futures-enabled trading account. You can find a list of futures brokers here or find more educational resources on The Armchair Trader on how to trade futures on the Dow Jones Industrial Average.
Or, explore any number of index-linked investment products that will track the Dow Jones. If you’re a UK resident, you’re also able to trade the index through a tax-free spread betting broker.
Latest Dow Jones Industrial Average News
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