Dow Futures are futures contracts that are based on theis the index of 30 blue chip stocks that are traded on the New York Stock Exchange.is one of the most famous stock indexes in the world and every day if you watch the financial news like that on CNBC, you will hear constantly about the performance of the Dow Index that day.
Futures trading is somewhat different than the traditional buy and hold investing. In futures trading, you have to constantly monitor the price. If you dont, then you will very soon receive the margin call from your broker. Dow Futures are based on the Dow Jones Index and the value of the Dow futures contract is equal to 10 times the value of the index at a particular point in time.
Similarly, if you are bearish on the DJIA, you can go short onDow Futurescontract. Again, each point decline in theDJIA Indexwill give you $10 for profit. Unlike stocks, you can go short on futures contract without bothering about the uptick rule as none applies on the futures contract. This makes futures trading far superior for speculative purposes as compared to stock trading.
Futures trading is risky and if you are a buy and hold type of investor then you should stay away from futures trading. However, if you have an appetite for risk and can monitor the market constantly then you can profit handsomely from futures. Other futures contracts that are popular with traders are the S&P futures contract and crude oil futures contracts.
TheDow Jones Industrial Averagewas created by as a stock index by Charles Dow in 1896. Though only one of several indexes, it remains one of the most important in the investing world after over one-hundred twenty years. The Dow has seen a number of economic changes in the intervening years but has remained an important tool.
TheDow Jones Industrial Average Futureswas created to represent the overall health of the industrial sector of the United States economy, but today stands as a benchmark of the economy as a whole. In many ways, the Dow represents how the United States private sector is doing financially as it represents 30 important stocks in the United States chosen by the economic relevance of the companies represented. The Dow works well as a forecast of how the economy will perform in the near future and represents an important trading tool for those on Wall Street.
Dow Futures Livecontracts are one of the more popular index futures with an ever increasing number of beginning traders choosing it as the futures contract of choice. The index futures market is volatile and liquid offering multiple opportunities to execute profitable trades throughout each daily market session. With a five dollar multiplier for each contract on each up or down tick, its possible for traders to profit substantially during Dow futures live trading, executing both long and short trades.
However, novice traders will very often experience difficulty and frustration since they dont understand the dynamics of theDow Futures Live. Very few beginners approach the market with an intact trading plan and only a rudimentary knowledge of the financial markets. Futures and Forex brokers are very good at advertising, misleadingly creating the illusion that trading emini contracts are as easy as opening an account with profits miraculously materializing. Unfortunately, this is not the case since a trading system must be in place that utilizes strict trading rules and money management principles to be profitable.
For beginning traders, obtaining the knowledge to be successful is difficult since live trading requires the use of real money. Broken and unprofitable trades can quickly add up with account drawdown reducing brokerage balances below minimum account requirements before the new traders have obtained the knowledge necessary to be successful. However, by tapping into the knowledge of emini trading veterans, a new trader can reduce the learning curve to manageable levels giving the beginner the padding needed to become successful.
Some traders offer exclusive online trading rooms which allow them to interact with rookie traders as they explain market dynamics. By following along in aDow eminilive trading room, the beginner can quickly learn how the Dow contract trades while learning strategies that fit their personality and risk tolerance. By trading alongside seasoned traders, the beginner will soon be trading with the confidence necessary to succeed in the index futures markets.
With the recent volatility creating instability in peoples portfolios and peace of mind, I thought we should take a look at how the DJIA (Dow Jones Industrial Average) has performed over the past 30 plus years since 1975. In this time frame, theDJIA Futureshas ranged from a high return of 38% in 1975 to a (-17%) loss in 1977. From 1975 to 2006, there were 23 positive years and 9 negative years. If you were to take a simple average of the yearly returns over this time period, you would come up with an average return of 10.83%
Does this mean you will earn a 10.83% yearly return by investing in theDJIA Futures? NO. Some years you will earn that or more while others you will earn less, even lose money. What your overall return will be is not as simple as taking an average. Let me give you an example: Two people invest their money in different financial instruments over 5 years. The first investor earns a flat rate of 8% each year, while the second investor earns 15%, (-3%), 18%, (-12%), and 22% over the five years. Both of these investors have earned a simple average of 8% for the 5 years, but do they have the same amount?
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