What is the US30 Index?

The US30, based on the Dow Jones 30 is a U.S. stock index composed of 30 of the largest publically traded U.S. companies. It was created in 1896 and was meant to be an easy way to track the U.S. stock market performance at a time when information flow was not as rapid or pervasive. The components of the US30 and the DJ30 can and do change as companies grow and shrink. The DJ30 is still considered to be an accurate gauge of the health of the U.S. equity markets.

Should I trade the US30 Index?

Because of its composition the US30, which is based on the US30 can be an excellent way to speculate on the strength of the U.S. economy. It is also a good way to speculate on the overall global economy since the DJ30 or US30 components are all multi-national corporations with business spanning the entire globe. Those looking to trade the US30 should become very familiar with all the underlying components too. Because the US30 is a price-weighted index a large move in any of the components can have a significant effect on the index.

What is the best strategy for trading the US30 Index?

The best strategy for trading the US30 is the one a trader is familiar and comfortable with. Aside from that there are a number of high probability strategies that can be used. One such is based on closing gaps that appear at the open on the US30 or Dow Jones 30 chart. In many cases the index will be higher or lower at the open than it was the previous session at the close. This is known as a gap. A high-probability trade is to look to close that gap with your trade. For example, if the market opens lower than the prior close you would enter a long position with the target being the previous session’s close. The gap needs to be at least 20 points, and it shouldn’t be more than 50 points.

Dow Jones (US30)

Dow Jones

The stock market index known as the Dow Jones Industrial Average, also called DJIA, the Dow Jones Industrial, the Industrial Average, DJI, the Dow Jones, the Dow 30 or simply the Dow was founded by Charles Dow and Eduard Jones in the mid-1880s.

The index is a price-weighted average of 30 of the most significant stocks that are traded on the NASDAQ and New York Stock Exchange (NYSE). This particular index is the most followed and watched in the world, as its conglomerates include some of the most accomplished companies recognised worldwide.

When you hear ‘the markets are up (or down) today’ they typically refer to the Dow – that is how influential this index is. Currently, the index is owned by S&P Dow Jones Indices and is majority owned by S&P Global.

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DJIA History

Charles Dow and Eduard Jones formed the Dow Jones Industrial Average to serve as a proxy for the US economy. From its inception, the DJIA included only 12 companies that were all industrial based. They included gas, cotton, tobacco, oil and sugar – all which operated in conjuction with the railroads. General Electric was the last of the original components to lose its place in the index in June 2018.

The index cultivated more components, from 12 to 30 in 1928 and since has changed these components over 51 times within that time, with the first change that was brought about 3 months after it was first launched in May 1896.

Starting off, the level stood at 62.76 and reached its peak in 1890 to 78.38, then during the summer of 1896 hitting an all-time low of 28.48, which later led to what is known as the ‘panic of 1896’. From the 1900s, momentum picked up and fell over 14 years and eventually stabilised. However, during the great depression of 1928, the world’s economy suffered a crash and the index did not recover until 1954, when it started to follow market trends as we know today.

DJIA Index composition

As the economy experiences changes, so do the Dow and its composites. Like other indices like the Russell 2000 index or the Japanese Nikkei-225, all its components are price-weighted, which means that the price per share for each stock included is divided by the total number of stocks that comprise the index.

The corporations of the DJIA are chosen by a committee at Dow Jones S&P Index. The organisation ensures that a healthy and positive reflection of the US economy is at the forefront of the index, and this is the basis for them selecting only the top performing companies.

Top 5 companies represented by DJIA and their index weighting (%)

Goldman Sachs	7.59%
3M	6.32%
Boeing	5.87%
IBM	5.77%
United Health Group	5.47%

Factors that influence the overall index price

Some of the factors that drive the DJIA include natural calamities, economic slumps within the US or other countries, increased oil prices and currency strength, reflected in the dollar index. Mostly the index drops due to market uncertainties. Investors usually are cautious when investing in the highly volatile components of the index.

Shares may fall when the Dow sees current investors selling their stocks due to market limitations, which can include a decrease in one or more of the companies’ profits or when they are caught in any wrongdoing.

War and terrorism prompt investors to pull out of the markets, as these force a decrease in the demand for goods and services that could be purchased by consumers from the companies that make up the DJIA, thus impacting their revenues.

On the other hand, when investors see a small drop in the Dow this may trigger them to hold on to their shares, and even get them to buy more in the anticipation of the index seeing an increase and prompting investors to gain the profits from the market change. When a significant drop in the markets occur, this could imply the beginning of an economic crisis and will result in a decrease in stock values.

DJIA Trading information

The Dow 30 futures contract is tradable from 22:01 – 20:14 (GMT), Monday to Friday
The Dow 30 moves in increments of 1.00
The Trading on Margin allowed
The minimum trade size is 1 index
The currency of the Dow 30 is the US Dollar

Trade the DJIA with Friedberg Direct

Enter your DJIA trades with confidence when you become a trader at Friedberg Direct. We offer you a variety of educational tools from beginner to advanced. As an additional advantage, Friedberg Direct covers the global markets and will serve you with up-to-date information on any instrument you decide to trade on.