67.90 % of retail investors lose their capital when trading CFDs with this provider.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 67.90 % of retail investors lose their capital when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Dow Jones Industrial Average index - definition and characteristics

The Dow Jones Industrial Average (DJIA) is a stock market index that measures the stock performance of the thirty largest companies listed on stock exchanges in the United States.

The Dow Jones index is price-weighted, meaning that companies with higher prices influence the index the most. For example, Boeing used to have the most significant impact on the Dow Jones index, when it was trading above 400 USD as it was the most expensive stock in the index. Nowadays, the price has dropped below 200 USD. Thus the significance of Boeing in Dow Jones has lessened significantly.

For this reason (price-weighting), traders usually don’t take the Dow Jones index as an investing benchmark, and neither economists track this index when comparing the US economy with US stocks. Commonly, the SP500 index is chosen as a benchmark due to its broadest portfolio of stocks, representing each sector of the US economy.
 

Two Dow Jones indices

There are two Dow Jones indices – one is the mentioned Industrial Average, and the second, less known, is the Transportation Average. The transportation average index tracks mostly transportation companies, such as railroads, freighters, trucking, etc.
 

Calculation

To calculate the Dow Jones Index, the sum of the prices of all 30 stocks is divided by a divisor, the Dow Divisor. The divisor is adjusted in case of stock splits, spinoffs, or similar structural changes to ensure that such events do not in themselves alter the numerical value of the DJIA. The mentioned divisor is currently around 0.1458.

As previously said, if investors and traders want exposure to the whole US market, they don’t trade the Dow Jones as it contains only 30 largest companies in the USA, without a serious sector diversification. In this case, traders often trade the SP500 index.
 

Performance

As the other three US indices, the DJIA has gone nowhere but up since the financial crisis.

 

Source: Purple Trading Metatrader 4


The monthly chart shows that if a correction occurred, it was usually only a small one and shortly afterward, the market rallied to new cycle highs.

The DJIA is volatile and liquid enough for short-term traders, but long-term investors tend to prefer the SP500 index, due to its broad sector diversification. However, investing into DJIA can be equally rewarding.

Over the long-term, US equities always go up. But sometimes the timing is crucial, so be careful when trading/investing.
 

Composition of the index

As of 2020, there are following companies in the Dow Jones index:

Company

Industry

Index weighting (march, 2020)

3M

Conglomerate

4.34%

American Express

Financial services

2.75%

Apple Inc.

Information technology

8.08%

Boeing

Aerospace and defense

4.18%

Caterpillar Inc.

Construction and Mining

3.31%

Chevron Corporation

Petroleum industry

2.18%

Cisco Systems

Information technology

1.26%

The Coca-Cola Company

Food industry

1.29%

Dow Inc.

Chemical industry

0.93%

ExxonMobil

Petroleum industry

1.16%

Goldman Sachs

Financial services

5.02%

The Home Depot

Retailing

6.04%

IBM

Information technology

3.45%

Intel

Information technology

1.71%

Johnson & Johnson

Pharmaceutical industry

3.90%

JPMorgan Chase

Financial services

2.89%

McDonald's

Food industry

5.30%

Merck & Co.

Pharmaceutical industry

2.26%

Microsoft

Information technology

4.85%

Nike

Apparel

2.36%

Pfizer

Pharmaceutical industry

0.97%

Procter & Gamble

Fast-moving consumer goods

3.38%

Raytheon Technologies

Aerospace and defense

2.84%

The Travelers Companies

Financial services

3.07%

UnitedHealth Group

Managed health care

7.19%

Verizon

Telecommunication

1.64%

Visa Inc.

Financial services

5.05%

Walmart

Retailing

3.76%

Walgreens Boots Alliance

Retailing

1.48%

The Walt Disney Company

Broadcasting and entertainment

3.21%

 

Dow Jones Index - quotes and trading

If you want to buy or sell the DJIA, find the ticker DOW in our Purple Trading Metatrader 4 platform and press the new order button. The following window will pop up.
 

 

Source: Purple Trading Metatrader 4

 

Lot value calculation

When you click on the DOW ticker in our Metatrader 4 platform, you can see that the spread between the Ask and Bid price is 2.00 USD during the times of high liquidity (usually when London and New York are open for trading).

The minimal volume for this index is one micro lot (0.01). If you trade a micro lot, you will earn or lose 5 cents per each USD the index makes. If you trade a mini lot (0.1), you will earn or lose 50 cents for each USD the index makes. When trading half a lot, each USD of the index movement will yield 2.50 USD of profit/loss. For example, you buy half a lot at 24,000 USD, and the index goes to 24,500 USD. Your total profit will be 1,250 USD (calculated as 500 USD movement * 2.50 USD profit per each USD of the move). The same logic applies to calculate your profit or loss when entering a short position.

Keep in mind, that this index is quoted in US dollars; thus, if your account is in EUR, each point of the index will yield circa 0.90 EUR loss/profit.

As with everything, you can trade at the current market price (market execution), or you can use pending orders (limit and stop orders). It's not necessary to enter the stop-loss and take-profit order right now – you can open the trade without them and add them later.

 

Your capital is at risk.

Nejčastější otázky

ASK
Show answer
The offering price on the market for which the buying positions are executed and selling positions are closed. It is higher than BID price.
BID
Show answer
Bidding price on the market for which the selling positions are executed and buying positions are closed. It is lower than ASK price and the chart displayed in MT4 is based on this price.
 
Lot
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The basic unit of traded volume. For currency pairs, it is 100,000 units of the base currency. Lot size varies between individual CFD-type instruments as it is based on the number of contracts set for each one.

 
Micro-lot
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A micro-lot is a trading unit derived from the standard trading unit, which in the Forex world is the lot. While 1 lot represents a transaction of 100,000 units of the currency mentioned first in a currency pair, the value of 1 micro lot is 1,000 units.

If you are interested in the relationship between lots, micro-lots, leverage, and margin, we recommend reading the article about micro-lots we wrote on the subject.

A micro lot is 0.01 lot.
Mini lot
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A mini lot is a volume of 0.1 lot.
Swap
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A fee charged for holding a trading position overnight. It is expressed in points or percents and it is directly proportional to the volume of the trading position held. Please note the Swap for Forex pairs and precious metals is being charged 3x on Wednesday, which includes also the weekend swaps. (Swap is charged at Wednesday - Thursday midnight) For other symbols is being charged 3x on Friday. (Swap is charged at Friday - Saturday midnight)
67.90 % of retail investors lose their capital when trading CFDs with this provider.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 67.90 % of retail investors lose their capital when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.