Dow futures are financial futures that allow an investor to speculate on or hedge future price movements of any of the many elements of the Dow Jones Industrial Average. The futures contracts are typically derived from the Dow Jones Industrial Average as E.mini Dow futures. The E.mini Dow futures are traded in the same way as any other futures contract. Investors must have a cash investment equal to or greater than the amount of the contract.
Dow futures contracts are traded on the Over the Counter Bulletin Board, also known as the OTCBB. There are currently no face value stocks available for trading in the futures contracts. There is currently one stock contracts for each of the Dow Jones Industrial Average constituents.
The components are the Dow Jones Industrial Average, the DJIA, and the NASDAQ. The DJIA or the Dow Jones Index is a very complex index that is not based on any particular company. It represents the performance of hundreds of companies that make up the Dow Jones Industrial Average. The DJIA is frequently referred to as the Dow Jones Transport Average. The Dow futures contracts represent the contracts for the actual stocks. Stocks are represented by individual stocks which are traded on Nasdaq.
Prior to the opening of the stock market on Monday, January 20th at 2 p.m. the Nasdaq trading commenced and closed on Friday, January 21st at 2 p.m. Trading began on Friday, January 14th and closed on Monday, January 20th at 2 p.m. If you are planning to invest in the Dow futures, you should be well informed of how the market works before making your trade.
An important component of your trading strategy should be the money management rule. Make sure to set aside a small portion of your monthly income for any potential losses that may occur during your trading period. A money management rule is especially important if you are trading Dow futures. This rule requires that you diversify your financial holdings in order to protect your principal investment.
One important attribute of Dow futures trading involves the leverage factor. Leverage is an essential factor for any trading strategy because it enables you to gain or lose on a trade even when the market is volatile and there are many players in the market. When you are holding a large number of stocks, this leverage factor is multiplied by the number of shares held. If you use leverage, the risk factor increases since more than one percent of your total stock could go into danger in one trade. In this type of situation, you might be losing money instead of gaining profit.
The widely followed futures trading strategy involves the trend following rule which is equally important as the leverage factor. Trend following means that you should watch for signals about the prices of Dow stocks. You should closely watch the price action that is taking place in the market if you want to make money out of your investments. The price movements are highly influenced by many factors such as global economics, geo-political events and news coverage. It is a commonly followed strategy in the stock market and it is strongly advised in the case of trading in futures as well.
Finally, when you are trading in the stock market, you have to be conscious about the security measures employed for the trading of your option contracts. There are two security methods in the case of trading of Dow futures contracts-the naked call option and the put option. While you can always rely on naked calls for intra-day trading, you should not forget the benefits of putting a put option in place on the same day. However, you can still use DJIA dow Jones industrial average contract for overnight and daily trading. This article has provided you with an introduction on how to trade in DJIA Dow Jones Industrial Average futures contracts.