Are you interested in day trading the Dow Jones futures? In this post, we will provide you with tips and strategies to help you succeed. The Dow Jones is one of the most popular markets to trade, and there are several different ways that you can approach it. We will discuss some of the most common strategies and advise you on how to use them best.
Dow Jones Futures
The Dow Jones Industrial Average (DJIA) is a price-weighted average of 30 blue-chip stocks that are generally the leaders in their respective industries. The futures market for the DJIA is traded on the Chicago Board of Trade’s (CBOT) electronic trading platform, and it is one of the most popular markets for day traders.
When you trade Dow Jones futures, you are speculating on the direction of the DJIA index. If you believe the index will rise, you will buy a contract; if you think it will fall, you will sell a contract. Each contract represents $100 times the value of the DJIA index. For example, if the DJIA is currently at 12,000, each contract is worth $12,000 ($100 x 120).
The DJIA is a price-weighted index, meaning that the stocks with the highest prices have the most significant impact on the direction of the index. The weighting of each stock is determined by its price per share divided by the sum of all 30 stocks’ prices per share. So, if Stock A has a price per share of $100 and Stock B has a price per share of $50, then Stock A would have twice the weighting of Stock B. This means that when Stock A goes up or down, it will have twice the impact on the DJIA than if Stock B moved by an equal amount.
Dow Futures Contracts
There are two Dow Jones futures contracts: the standard contract and the mini contract. The standard contract is for $100 times the DJIA index, while the mini contract is for $50 times the DJIA index. So, if the DJIA is currently at 12,000, each standard contract would be worth $12,000, and each mini contract would be worth $6000.
Margin Requirements
The margin requirements for dow jones futures contracts are set by the Chicago Mercantile Exchange (CME). The initial margin is the amount of money that must be deposited in the account when the contract is bought or sold. For example, if the margin is 10%, and a contract is worth $100,000, then $10,000 must be deposited in the account.
The maintenance margin is the minimum amount of equity that must be maintained in the account. If the account falls below this level, it will be subject to a margin call. The initial and maintenance margins for dow jones futures contracts are currently set at 10% and 7%, respectively.
The margin requirements for Dow Jones futures vary depending on your broker and account type. Margin requirements are generally between 20-30% of the value of the contract. So, if you were trading a standard Dow Jones futures contract with a margin requirement of 25%, you would need to have $3000 in your account ($12,000 x 0.25).
Liquidity
Dow Jones futures are very liquid, meaning many contracts are traded daily, and buying and selling contracts at the prices you want is easy.
Liquidity refers to how quickly an asset can be bought or sold without affecting the price. Highly liquid assets, such as cash or Dow Jones futures, can be traded rapidly and with minimal price impact. Less liquid assets, such as real estate or collectibles, may take longer to sell and may be subject to greater price volatility.
For traders, liquidity is important when deciding which assets to trade. Highly liquid assets offer lower transaction costs and greater certainty of execution, while less liquid assets may offer higher potential returns. Ultimately, each trader must decide which trade-off is best for their individual trading goals.
Best Times to Trade Futures
US Equity futures trade around the clock from Sunday evening to Friday evening with just an hour and fifteen minutes break each day. Just because they are open for most of the week, does that mean you should always be at your desk looking for opportunities? Not at all! That would lead to a lot of frustration and an eventual burnout! We often tell our traders to fit trading around their schedule, not the other way around.
To this point, certain hours of the day tend to see more volume and volatility than others. As you might imagine, since the Dow Jones is a US stock index, it is best to day trade the futures during the US session. The best time to trade Dow futures is between 9.30 am EST – 11.30 am EST. If you can’t commit those few hours during those days or if your life commitments don’t allow for it, that’s ok! Look for other opportunities when the US markets are closed, such as trading international indices or forex pairs!
Strategies
When day trading Dow Jones futures, there are several different strategies that you can use. Some common techniques include trend following, scalping, and contrarian trading. We will discuss each of these in more detail below.
Trend following is perhaps the most popular day trading Dow Jones futures strategy. As its name suggests, trend following involves taking trades in the same direction as the overall trend. So, if the DJIA is in an uptrend, you would look to buy contracts, and if it is in a downtrend, you would look to sell contracts. The key to successful trend following is to correctly identify the direction of the trend and then ride it for as long as possible.
Scalping is another popular strategy for day trading Dow Jones futures. Scalping involves taking quick profits on small price movements. So, you might buy contracts at 12,000 and then sell them at 12,002 for a quick profit of $200. This strategy can be profitable if done correctly, but it requires a lot of discipline as it is easy to get caught up in the excitement of making quick profits and losing money.
Contrarian trading is a strategy that goes against the overall trend. So, if the DJIA is in an uptrend, a contrarian trader would look to sell contracts, and if it is in a downtrend, they would look to buy contracts. The key to successful contrarian trading is correctly identifying reversals in the trend.
Summary: Dow Jones Futures For Day Trading
No matter what strategy you use when day trading Dow Jones futures, there are a few things that you need to keep in mind. First, ensure you understand your risk tolerance and position size before entering any trades. Second, always use stop-loss orders to protect yourself from large losses. And finally, don’t get emotional about your trades; just stick to your plan and let the market do its thing.
If you follow these tips, you will be well on your way to success as a day trader of Dow Jones futures. So, what are you waiting for? Get started today!
Learn More
Maurice Kenny has helped over 600 people become financially free through one-on-one coaching, mentorship, and options trading strategy. Many of these new traders are now full-time traders, and they all started by watching his 1-hr webinar.
Feel free to check out other FREE educational resources to help guide you as you begin your new journey to financial freedom.
Also, download a (FREE E-BOOK) by Maurice Kenny, “DAY TRADE LIKE A MILLIONAIRE.”
