Adding the Dow Jones index to your portfolio will allow you to track changes in the performance of equities on Wall Street today. DJ30, also known as US30, Dow Jones or simply Dow, is based on the Dow Jones Industrial Average Index. This consists of 30 major US companies that are chosen in order to represent American industry in general. The good news is that eToro offers investors an easy way to invest on this index through its platform.

Thinking of trading Dow Jones with eToro?

77% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

History of Dow Jones

Since its inception in 1896 by Charles Dow and Edward Jones, the Dow Jones Industrial Average (DJIA) has been one of the most widely watched and recognized stock market indices. It monitors the stock market movements of 30 publicly traded businesses in the United States of America listed on the NASDAQ or the New York Stock Exchange daily (NYSE). The 30 publicly traded companies frequently are economic leaders in the United States. The index is adjusted when one or more components face financial distress, reducing its importance in its sector, or when the economy undergoes a substantial transition that must reflect in the composition.

Dow Jones
Dow Jones

Charles Dow established his first stock index, called the Dow Jones Transportation Average (DJTA), two years before the DJIA. The DJTA is the most well-known indicator of the United States transportation industry. The DJIA's original constituents mostly are industrial companies involved in gas, sugar, tobacco, railways, and oil. The DJIA index measures the performance of 30 equities or stocks belonging to the largest blue-chip companies in the United States. Over the years, the index has undergone various revisions. In 1916, the DJIA components increased from 12 to 20 equities and later expanded to thirty (30) stocks in 1928, which has remained constant to the present day. Eight (8) stocks were delisted and replaced with new ones in 1932, including Coca-Cola and Procter & Gamble Company. The DJIA component stocks saw significant changes due to corporate bankruptcies or mergers in the 1930's great depression and the great recession of 2008.

Components of the Dow Jones

The following are the companies listed in Dow Jones:

  1. 3M Company
  2. American Express Co.
  3. Amgen Inc.
  4. Apple Inc.
  5. Boeing Co.
  6. Caterpillar Inc.
  7. Chevron Corp.
  8. Cisco System Inc.
  9. Coca-Cola Co.
  10. Dow Inc. 
  11. Goldman Sachs Group
  12. Home Depot Inc.
  13. Honeywell International 
  14. Intel Corp.
  15. International Business Machines Corp.
  16. Johnson & Johnson
  17. JPMorgan Chase & Co.
  18. McDonald's Corp.
  19. Merck & Company Inc. 
  20. Microsoft Corp.
  21. Nike Inc. Class B
  22. Procter & Gamble Co.
  23. Salesforce Inc.
  24. Travelers Cos. Inc.
  25. UnitedHealth Group Inc.
  26. Verizon Communications Inc.
  27. Visa Inc. Class A
  28. Walgreens Boots Alliance Inc.
  29. WalMart Inc.
  30. Walt Disney Co.

Factors to Consider When Trading Dow Jones

Trading has some severe caveats; you would have to tread very carefully. These are the factors that need to consider before you explore further:

  1. Why did you choose to invest in this particular stock?
    It is critical to understand your rationale for purchasing any company's shares from the start. You cannot buy equities only based on a romanticized image of a corporation, its brand, or the sort of people that work there.

    Your feelings about products, services, or people are deemed secondary when it comes to putting your hard-earned money to work. Emotional investments are the poor basis of investments.

    Similarly, while speculative investments might generate profits, they cannot serve as the foundation for a long-term plan. Stocks that are cheap or appropriately priced are suitable for investment.

  2. Are you familiar with the company's pricing structure?
    Everyone understands the price of an individual stock, but do you know how the business is valued? How much will be acquiring the firm outright cost you? In other words, what is the company's market capitalization?

    Simply put, a company's market capitalization is the stock price multiplied by the total number of outstanding shares at any moment in time.

    The price per share provides limited information in and of itself -- as it does not indicate the company's overall value. The market cap provides a more accurate indication of the company's entire market value.

  3. How long are you planning to keep this stock?
    Your investing period will vary based on the reason you are purchasing a particular stock. As a result, your investment plan and strategy are determined.

    The long-term strategy is to acquire a high-quality stock at a discount and then let time and the experience of top management work to increase the company's earnings.

    In comparison, short-term strategies are concerned with current events that impact stock values; ascertain that you understand your process.

  4. Are you aware of the impact of per-share growth?
    One component of investing in a company that is sometimes left unnoticed is the importance of per-share growth. Consider the possibility that a company may earn equal profits year after year yet provide investors with rising returns merely by lowering the number of outstanding shares.

    With each new share a company offers on the market, your portion as an investor in the company decreases. As additional equities provide for a low price, your equity of distributed earnings will continue to decline.

    Nevertheless, it is always preferable to invest in a company that prioritizes the reduction of the outstanding share, which increases your enthusiasm for the company. As an outcome, after earnings have already been distributed to shareholders, you will likely receive a larger percentage of the profits.

    The fewer outstanding shares in a company, the higher will be your interest in earnings and assets. Any company that prioritizes shareholder wealth development is a better investment than one focused on increasing shareholder value.

  5. Making a case for stock investments
    Before separating with your hard-earned money, it is prudent to consider the following:

    a. What is your rationale for investing in the stock?
    b. What gains are you hoping to achieve?
    c. When do you want to obtain access to your capital and profits?
    d. Where, in your opinion, is the most excellent place to invest your money?

    Stocks may be a beneficial component of your investment portfolio if you have the answers to these questions and a well-defined trading strategy in place.

How to Trade Dow Jones?

To trade Dow futures, you must either open a trading account with an exchange or, if you already have a stock trading account, you must obtain permission from your brokerage firm to trade futures.

Trading DJ30 via Stock Index Futures

Stock index futures are available from most major brokerages. When a position is opened and ended, they typically charge a commission for their services.

When choosing a broker, the platform's convenience, commission rates, customer service, features like as news and data streams, as well as analytical tools like charts are all important factors to consider.

Dow Jones Futures news
Dow Jones Futures news

Trading DJ30 via ETFs

An exchange-traded fund, often known as an ETF, is a mutual fund that can be traded on a stock exchange like a stock, allowing it to be purchased and sold at any period. In comparison to other forms of funds, exchange-traded funds (ETFs) frequently have cheaper fees. ETFs come in a variety of shapes and sizes, with differing degrees of risk.

If you have low capital but wish to trade the Dow, DIA ETF alternatives may be a viable solution, provided you understand the dangers associated with options trading.

Here's a tip: A defensive put strategy entails purchasing long positions in Dow exchange-traded funds (ETFs) and selling put options on the same underlying ETF. This technique will pay off if the DJIA increases in value and will safeguard your investment if the DJIA decreases in value.

By contrast, investors can employ a protective short selling technique by shorting the Dow ETF and purchasing call options on the underlying ETF. This method will yield a profit if the DJIA falls and protect your investment if the DJIA rises.

Finally, investors can use a covered call technique to earn a small premium on top of a long Dow ETF position. This technique is profitable if the Dow remains relatively stable and does not reach the strike price of the traded call options. However, because a covered call strategy provides no downside protection, investors are convinced that the Dow will remain flat before applying this approach.

  • Mutual and exchange-traded funds: Purchasing an index fund that reflects the daily volatility of the Dow Jones Industrial Average is the simplest way to invest indirectly in the Dow Jones Industrial Average. By holding the same equities and in the same proportions as the index, a mutual fund or an exchange-traded fund (ETF) can duplicate the index's performance before fees and expenses are deducted from its earnings.

    ETFs that use leverage or short strategies to amplify market fluctuations are called exchange-traded funds (ETFs). Transactions are frequently handled via an open bidding or an electronic network, such as the Globex exchange operated by the CME Group.

  • Options contracts: Under the symbol DJX, the Chicago Board Options Exchange (CBOE) holds option contracts on the Dow Jones Industrial Average (Dow Jones). Options contracts on some exchange-traded funds (ETFs) with Dow underlying securities are also tradeable.

Trading DJ30 via CFDs

A contract for differences (CFD) rewards the parties for the difference in price movement between the open and closed trade. CFDs, which are essentially contracts for difference, allow investors to trade the direction of securities quickly. They are prevalent in the forex and commodities markets. In addition to index funds, the DJIA's investments can be accomplished using commodities such as options contracts and futures contracts.

How does it work?
CFDs are cash-settled, although they often allow for substantial margin trading, requiring investors to put only a tiny portion of the contract's notional payout on the line.

The Dow Jones Industrial Average is a highly valued asset that can be traded through various brokerages that offer a robust CFD offering on commodities to their clients. You may buy and sell Dow CFDs just like any other tradable asset on the market if you want to benefit from the excellent performance of the businesses featured in the index.

In addition...
Trading Dow Jones CFDs allows traders to take advantage of leverage, increasing traders' potential returns even when they start with small upfront investments.

Trading DJ30 CFDs with eToro

eToro offers traders and investors the opportunity to profit from a security's price movements and enter into a brokerage agreement, allowing them to trade indexes in minutes. CFDs can be potentially profitable from both upward and downward price fluctuations and use leverage to trades a large sum of money than the trader has placed, thus increasing the trader's profit.

DJ30 index trading on eToro's platform
DJ30 index trading on eToro's platform

Nonetheless, traders should still monitor their trading losses to be aware of the risks. The good news is that it has no transaction charges; traders pay the spread between the purchase and sell trading prices.

How to Trade Dow Jones in eToro?

  1. Create an account on eToro or log-in your account for existing users.
    eToro web-based platform
    eToro web-based platform
  2. Click "Discover".
    Clicking "Discover" on eToro
    Clicking "Discover" on eToro
  3. Select "Indices".
    Selecting Indices on eToro's platform
    Selecting Indices on eToro's platform
  4. Look for "DJ30".
    Looking for DJ30 on eToro's list of indices
    Looking for DJ30 on eToro's list of indices
  5. Select BUY or SELL.
    Buying or selling DJ30 CFDs in eToro
    Buying or selling DJ30 CFDs in eToro
  6. Key in your desired amount to invest or the number of Dow Jones units you want to trade.
    Entering amount to invest on DJ30 via eToro
    Entering amount to invest on DJ30 via eToro
  7. Check and set the stop loss, leverage, and take profit parameters.
    Checking stop-loss, leverage and take profit on DJ30 CFD trade
    Checking stop-loss, leverage and take profit on DJ30 CFD trade
  8. Select "Open Trade".
    Executing DJ30 buy order on eToro
    Executing DJ30 buy order on eToro

Ready to trade Dow with eToro?

eToro is a multi-asset platform which offers both investing in stocks and cryptoassets, as well as trading CFDs.

Please note that CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77% of retail investor accounts lose money 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.

Past performance is not an indication of future results. Trading history presented is less than 5 complete years and may not suffice as basis for investment decision.

Copy Trading does not amount to investment advice. The value of your investments may go up or down. Your capital is at risk.

Cryptoasset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

eToro USA LLC does not offer CFDs and makes no representation and assumes no liability as to the accuracy or completeness of the content of this publication, which has been prepared by our partner utilizing publicly available non-entity specific information about eToro.

77% of retail investor accounts lose money when trading CFDs with this provider You should consider whether you can afford to take the high risk of losing your money.