What Is Dow Jones Futures? Difference, Highlights And Precautions

Dow Jones futures trading is a financial contract that allows users to purchase an asset or the seller to sell an asset at a predetermined future date and price. Dow Futures are popular contracts that allow investors to invest in the Dow Jones Industrial Average (DJIA). In this article, we will learn about how to trade Dow Jones futures.

Table of Contents

What is Dow Jones Futures?

Dow Jones is a popular financial futures contract based on the Dow Jones Industrial Average (DJIA) stock market index. The Dow Jones futures contract tracks the spot price of the Dow Jones Industrial Average (DJIA). A futures contract is a legally binding agreement between two parties to exchange money or assets at a future date based on the price of the underlying index.

Key Takeaways

Dow Jones Futures is one of the popular index futures based on the Dow Jones Industrial Average (DJIA).
Trading hours differ according to the time zone and it is known as E-mini.
Dow Jones futures contract enables investors to speculate whether the stock market will rise or fall in a specified period of time.
The agreement is taken between the buyer who speculates the rise or fall and time and the seller who sells the assets or commodities.

Dow Jones Industrial Average (DJIA) Vs. Dow Jones Futures

The DJIA is the second oldest US stock index available in the stock market today. It is considered one of the best metrics for the US market and economy. It is also known as the blue-chip index because of the types of companies included in DJIA. Coca-Cola, AT&T, Wal Mar, Microsoft, and more are some companies. These days investors are able to gain exposure to the DJIA through various instruments such as options, CFDs, ETFs, and Futures.

A futures contract is a legally binding agreement between two parties to exchange money or assets at a future date based on the price specified in the underlying index. Dow Jones Futures index is a price-weighted average of blue chip stocks that are generally leaders in the industry. It allows investors to speculate on the future value of various components of the DJIA market index. Investors can also hedge against potential losses in their stock portfolios.

Dow futures are traded on the Chicago Board of Trade (CBOT) and Chicago Mercantile Exchange (CME), which includes 30 large publicly traded companies on the New York Stock Exchange (NYSE) in the United States. The E-mini contract consists of $5 per tick on DJIA while the micro E-mini is one-tenth of the size of the E-mini and represents 50 cents per point.

Highlights of Futures Trading

Some major facts about Dow Jones futures trading options are given below.

Leverage benefits in futures trading are the best features of this investment. Investors can buy a contract for an agreed price and make a future contract while speculating the price.
Most of the trading platform provides futures trading options. If you have already a stock market account then request permissions for trading in futures.
Select a future trading strategy then start analyzing and researching various options available.
Maintain a sufficient amount to hold a position.
Close a current trade by simply entering an opposite order.

What is a Futures Contract?

Futures contracts are legal agreements to buy or sell a particular asset or commodity at a predetermined price at a specified time in the future. For instance, suppose the stock price of Hindustan Petroleum is 33.98 INR today and you set a futures contract for 45 INR as you believe the price of this commodity will increase in the coming three months.

How to Trade Dow Jones Futures?

Dow Jones futures are rapidly changing equities, with hundreds of thousands of contracts changing on a daily basis. Dow Jones Futures are traded quarterly and expire in the third week of March, June, September, and December. Check the steps below to trade Dow Futures below.

Connect a Broker: First investors need to visit a broker and settle contacts. Make sure the broker supports E-mini and ensures smoother services.
Educate Yourself: Make sure you know the basics of futures investing. Risking your money without proper knowledge of what you are getting yourself into might not be a good choice.
Open a Trading Account: There are many trading account platforms such as Upstox, Grow, Angel One, Dhan, etc. You can create an account on these platforms to start trading.
Make Deposits: You can fund your account using your banking account. Ensure sufficient funds into your future account to cover the initial requirements for the desired E-Mini dow contract size.
Plan a Strategy: Start your futures investment with a management amount that you can afford to lose potentially. Choose a strategy that aligns with your goals. Make sure to use trading analytics, marketing trends, technical analysis and consider economic factors while planning a strategy.
Analyze Market: Before placing a buy make sure to analyze the current market conditions. Look at the price charts, releases, factors, and other things that may influence the future price of the stock.
Place Your Trade: Use a trading platform and place your trade on your selected E-Mini dow futures. Specify the expiry date, position size, and type of order to buy or sell at a specific price. Use risk management techniques such as stop loss order to automatically drop off from the position if loss happens beyond a set limit.
Monitor Your Position: Keep monitoring your e-Mini dow futures position as small price movements can bring big changes in loss and profit margin.

Points to Be Taken Care Before Investing In Futures

Dow Futures is a trusted popular stock to buy, however, the stock market is filled with risks that can lead to significant losses. Small changes in futures position can make a big impact on loss or profit lead. Let us check some of the points to be taken care of before starting investing in Dow futures.

Must be familiar with the fundamentals of Futures trading. Analyze potential risks before investing.
Only invest the amount that you can afford to lose. Overinvesting can lead to significant setbacks and frequent losses.
Carry your own research before investing in futures.
Connect with an expert to guide you throughout the process.
Do not get misled by false advertisements and shortcut tricks as this might lead to huge losses.
Leverage trading might be beneficial but it can trigger huge losses too.
Know your goals, and consider drawing a financial roadmap.
Always maintain an emergency fund before starting to invest in private equities.

Trading Hours of Dow Jones Futures

With E-mini futures, you can trade for approx 24 hours a day during the trading week from Monday to Friday, i,e. Six days straight. Trading hours of Dow Jones futures as listed in Central Time (CT) is Monday to Friday at 5:00 PM, the previous day at 4:15 PM.

The trading halts for fifteen minutes from 3:15 PM to 3:30 PM. Some stock market holidays often close the Dow Jones futures trading.

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Dow Jones Futures FAQs

Q1. What is Dow Jones Futures?

Ans: Dow Jones is a popular financial futures contract based on the Dow Jones Industrial Average (DJIA) stock market index. It enables investors to speculate whether the stock market will rise or fall in a specified period of time.

Q2. How to trade Dow Jones futures in India?

Ans: Dow Jones Futures can be traded through E-mini futures through the NSE international exchange. Now, we can easily trade Dow futures in US dollars without any extra paperwork and formalities.