How to trade or invest in the Dow Jones

How can you trade or invest in the Dow Jones index?

With us, there are a number of ways to gain exposure to the Dow Jones, including trading our proprietary Wall Street market.

You can:

1. Trade our Wall Street market (based on the Dow Jones)
2. Trade or Invest in Dow Jones ETFs
3. Trade or Invest in Dow Jones shares

Trade or invest in Dow Jones ETFs

You can get broad exposure to the entire index by trading or investing in an ETF that tracks the price of the Dow. This means you won’t trade on the current price of the Dow Jones, but rather the ETF’s price, calculated on its net asset value (NAV).

Investing in Dow Jones ETFs is how many longer-term investors gain exposure to the entire index with just one transaction. You’ll do this with our share trading platform. Here you’d buy upfront, based on the full value of the Dow Jones-based ETF, and hold until you want to sell.

US-listed ETFs are commission free.¹ Because an ETF will give you exposure to many Dow Jones-related stocks all at once, this can be a convenient, one-and-done way to track the index.

You could also trade Dow Jones ETFs on leverage with CFDs, but bear in mind this offers lower liquidity and higher spreads than trading the index directly (as in our above explanation). Leveraged trades mean you can go long or short on ETFs. However, again, total profits or losses can significantly outweigh your margin amount, as both are based on the total position size.

Trade or invest in Dow Jones shares

With us, you can also trade or invest in the actual shares listed on the Dow Jones index – including the likes of Apple and Microsoft.

Here, you can sharpen your focus by trading specific Dow Jones stocks without having exposure to the entire index. This means you can choose your shares based on your personal trading strategy.

When you invest in US shares with us, you pay zero commission costs and own the actual company shares outright.¹

However, if you’ve got a certain Dow Jones company in mind but don’t want to take ownership of the actual shares, you can also trade Dow Jones companies using CFDs. These are leveraged trades, so you can go long or short.

US share CFDs attract a minimum commission of $15.²

How to start trading or investing in the Dow Jones

If you’re ready to start trading or investing in the Dow Jones, follow these four steps:

1. Create your trading or investing account
2. Learn what moves the Dow Jones’s price
3. Perfect your Dow Jones strategies
4. Discover what else you need to know about the Dow Jones index

Learn what moves the Dow Jones’ price

If you want to make a profit trading or investing in the Dow Jones, you’ll need to open and close positions at just the right time. For this, it’s essential to have a good understanding of what moves the Dow Jones index’s price.

Here are a few of the main factors that will drive the index price up or down:

Strength of the dollar

The strength of the US dollar will have an effect on the price of the Dow Jones. A strong dollar often means that the index will rise in value, while a weaker dollar will generally mean it falls.

Value of Dow Jones companies’ shares

As the Dow Jones index is made up of companies on the New York Stock Exchange (NYSE) and the NASDAQ, the share prices of those companies will affect the index’s price in turn. As it is a price-weighted index, the performance of companies with a higher share price will have a greater effect over the value of the index compared to those with lower share prices, because they have a greater weighting in how the Dow is valued.

Earnings reports

Similarly to ordinary share prices, Dow Jones companies’ earnings reports will affect the index. Strong earnings in large companies that are heavily weighted in the Dow Jones will often causing an increase in the index’s price, and weak reports will usually mean a decrease.

Economic events

It’s not just the index’s companies themselves that affect the Dow Jones, macroeconomic factors can play a role too. Any geopolitical factors that’ll affect the dollar’s price will likely affect the Dow Jones’ price, too.

News

While macroeconomic events themselves will play a factor, so too will news articles. Widely viewed news, both positive and negative, will affect the index’s price. In particular, news about central bank announcements, changes to fiscal policy in the States and reporting on big events like Coronavirus-related developments or presidential elections will all move the value of the Dow.

Perfect your Dow Jones strategies

There are a few ways you can hone your Dow Jones trading strategy, to ensure the best possible chance of doing well when trading or investing in the index. Here are some steps to follow:

• Choose your trading style: the first thing to determine is whether you’d suit a short-term, medium-term or long-term trading strategy. There are four main trading styles – scalping, day trading, swing trading and position trading
• Study charts and price action: poring over daily and weekly charts will help you learn the rhythms of the Dow Jones and the market at large, which will help you get a feel for what the index might do going forward and be able to strategise accordingly
• Look for trading signals: by studying the Dow Jones price chart, you should be able to tell whether the current trend is bullish or bearish. You can confirm current trends with momentum indicators like the stochastic oscillator or relative strength index (RSI)
• Follow industry news: you shouldn’t only rely on technical analysis to craft your trading or investing strategy, you should also keep an eye on the news. As we’ve said, macroeconomic events and news articles can materially affect the Dow Jones price, so keeping an eye on the headlines is vital for your strategy
• Set trading alerts: of course, it’s unreasonable to expect yourself to watch the news or the market constantly. That’s why you can also use trading alerts with us, to get automatic prompts when the market’s doing something important to your strategy. Input your chosen alerts when opening a position and you’ll be notified once your alerts are triggered. You can receive trading alerts via email, SMS or push notification on our platform

Discover what else you need to know about the Dow Jones index

There are traders who spend their lives studying the Dow Jones, and with good reason – there’s a lot to know. Here are a few more things you should know before trading or investing in the Dow Jones index:

How is the Dow Jones’ price calculated?

The Dow Jones Industrial Average index (or the ‘Dow Jones’ or ‘Dow’ for short) is a collection of the largest blue-chip stocks on the NYSE and the NASDAQ. It’s a price-weighted index. This means that the stocks’ share prices affecting the weighting of the index in descending order. So, more expensive shares like Apple will determine the Dow Jones’ price more than smaller stocks with lower share prices.

To determine the Dow Jones’ price, the index’s companies’ share prices are added together and divided by a specially calculated divisor number (as a more mathematically accurate substitute for dividing the share prices by the number of stocks there are in the Dow Jones – which is 30). These companies’ shares will have different weightings each depending on how high their share price is. This means that sudden changes in share price of a heavily weighted stock on the Dow Jones, for example on the day earnings reports are released, can significantly affect the Dow Jones’ price.

What are the Dow Jones’ trading hours?

The Dow Jones index is open during New York Stock Exchange hours, from 9.30am to 4pm Eastern Standard Time. This translates to 11.30pm to 6am (AEST). Bear in mind, though, that this will change in winter due to daylight savings.

Luckily, with us you can trade our Wall Street market 24 hours a day, Monday to Friday. You can also trade our exclusive Weekend Wall Street, from 5pm on Saturday to 7.40am on Sunday and 5pm Sunday to 7.40am on Monday (AEST).

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