Presentation of the Dow Jones and its characteristics:
Many people recognise the name Dow Jones without really knowing what it represents. It is actually the name of a stock market index representing the American economy. Its complete name is the ‘Dow Jones Industrial Average’ which is also known as the ‘DJA’ which has in turn become simply called the Dow Jones.
The Dow Jones is the first index that was quoted on the New York Stock Exchange. It is also the oldest international stock exchange index. It is the company Dow Jones Indexes that is responsible for its quotation, part of the CME group. But the name Dow Jones may remind you of something, or someone else, as it is named after the famous analyst, Charles Henry Dow, who among other things formulated the Dow Theory upon which technical analysis is based.
Please note, the Dow Jones upon which you have the opportunity of trading online is actually a sub-category composed of only 30 companies and which is therefore named the Dow Jones 30 or DJ30.
How is the Dow Jones quotation calculated?
Here we will focus particularly on the composition and the quotation of the Dow Jones 30 Index or DJ30, which can be traded online through various platforms. In a logical manner, the DJ30 represents the economic activity of the 30 major American companies that are the most profitable and representative of the American industrial sector.
Companies quoted by the Dow Jones:
As indicated by the abbreviation DJ30 which can be seen on the trading platforms and various communications, the Dow Jones reflects and comprises the activities of the 30 largest and most representative of the industrial sector of the United States. Here can be found prestigious companies such as Coca Cola, Intel and Walt Disney.
It is interesting to note that the calculation of this index differs somewhat from other international indices. In fact, like the NIKKEI, it is one of the few indices that are calculated according to the value of the shares that it comprises rather than the share capital of the concerned companies. This particularity is actually considered to be a fault in this American Index which has kept to the same quotation system since its inception over 120 years ago.
It is for this reason that the Dow Jones is no longer considered as the index of reference relative to the American market. This honour is now held by the S & P 500.
The History of the Dow Jones prices:
Since its creation in 1884, the Dow Jones Index has of course experienced highs and lows and it would be well nigh impossible here to resume its major trends in just a few lines. However it should be noted that following a number of years where it rose successively this index lost over 50% of its value in the crash of 1929.
Its highest historical record was at a level of 14,000 points which was attained in July 2007 before the global financial crisis created a downturn in its value.
Some advice for trading in the Dow Jones:
Whether you have decided to speculate on the Dow Jones using CFDs you should be able to identify strong rising or falling movements in advance. Given that this index is fairly representative of the American economy, you should take into account the fundamental data concerning the United States that you can find on the economic calendar.
However it is also important to complete full technical analyses alongside as this index reacts strongly to support and resistance levels.
Trading on the Dow Jones with CFDs:
To successfully trade on the Dow Jones you simply need to follow the economical events in the United States. Here are the points to watch:
- The commercial balance of the United States.
- The general economic policy of the country.
- The American GDP.
- The statistics concerning the industrial production.
- The export levels.
- The value of the American Dollar.