What Is the Dow Jones Industrial Average (DJIA)? How to Trade and Invest

Having a solid understanding of the Dow Jones Index is essential for successful investing and market trend analysis. In this article, we will explore:

The DJIA is often used as an indicator of the overall health of the U.S. economy. Since it consists of large, stable industrial companies, significant fluctuations in the index can signal major changes, such as economic expansions or recessions.

• Charles Dow, a Wall Street legend;
• Edward Davis Jones, his business partner. 

In 1882, they founded the Dow Jones & Company and began publishing stock indices in an investor bulletin, which later became the Wall Street Journal.

The first DJIA value was calculated as a simple arithmetic average of the stock prices of the included companies, amounting to approximately 62.75 points.

The Dow Divisor is not a fixed number but a coefficient that changes over time. It accounts for corporate actions like stock splits, mergers, and dividend payouts, ensuring the continuity of the index. As of early 2025, the Dow Divisor is approximately 0.16.

The index is calculated by S&P Dow Jones Indices, an organization that is majority-owned by S&P Global.

• In its early years, the Dow Jones Industrial Average was highly volatile as the U.S. industrial economy was just beginning to develop.
• The historical low was 28.48 points, reached during the summer panic of 1896. 
• The largest single-day drop occurred on “Black Monday,” October 19, 1987, when the index fell by 22.61%. The exact causes of the crash have never been determined.
• The smallest annual shift in the DJIA  index was -52.67% in 1931, during the Great Depression.
• The largest annual increase of +81.66% occurred in 1915, marked by a strong market recovery after the downturn caused by the start of World War I and a period of economic instability.
• The average annual growth rate of the DJIA is approximately 7.59%.
• None of the companies included in the first calculation of the index are part of it today. The longest-standing company in the Dow Jones Industrial Average was General Electric (GE). It was part of the initial calculation in 1896 and remained in the index, with a few exceptions, until 2018, when it was removed due to worsening financial performance and a significant drop in stock price.

Since its creation, the composition of the DJIA has undergone numerous changes, reflecting shifts in the economy. One major reshuffling occurred in 1932 under the influence of the Great Depression.

What stocks are included in the Dow Jones?

The companies in the Dow Jones are chosen by a specialized committee. Their selection is based on a mix of financial performance and the company’s importance within its industry.

• On August 31, 2020, Amgen, Honeywell, and Salesforce replaced ExxonMobil, Pfizer, and Raytheon Technologies.
• On February 26, 2024, Amazon replaced Walgreens Boots Alliance.
• On November 8, 2024, Nvidia replaced Intel, and Sherwin-Williams replaced Dow Inc.

✓ Underlying asset. Many financial products, such as Exchange-Traded Funds (ETFs) and other derivatives, are tied to the DJIA. By investing in these products, investors aim to track the price movements of the companies included in the index.

✓ Comparative analysis. Analysts use the DJIA to evaluate the price performance of individual stocks relative to the index. This helps determine whether a stock is a market leader or lagging behind.

✓ Strategic planning. The DJIA’s rich historical data allows for building models, developing long-term investment strategies, and analyzing economic development.

✓ Diversification tool. Investing in the Dow Jones Index can be effectively combined with investments in stock indices from other countries or commodities markets. Additionally, the DJIA’s lower volatility can help reduce the risks associated with investing in individual stocks.

• DJIA only includes 30 stocks. While this number might have been representative 100 years ago, it falls short in today’s economy with numerous emerging industries. Compared to broader indices like the S&P 500, the DJIA does not fully capture economic activity or market trends.
• Price-weighted index. The DJIA is calculated based on the stock prices of its components rather than their market capitalization. As a result, higher-priced stocks have a greater impact on the index, which can distort the overall picture.

✓ A valuable underlying asset. Futures, as derivative financial instruments, closely track all fluctuations in the index, reflecting them in the contract price. (Learn more: What is a futures contract?)

✓ Two-way trading. Traders can take long positions (expecting the Dow Jones Index to rise) or short positions (expecting its decline), allowing them to profit from price movements in either direction.

✓ 24/5 trading. E-mini Dow futures can be traded almost around the clock, regardless of the standard trading hours of stock exchanges.

✓ Hedging opportunities. E-mini Dow futures offer investors a way to hedge their portfolios against market risks. For example, if an investor anticipates a market downturn, they can open short positions in E-mini Dow futures to offset potential losses from holding stocks.

✓ Speculation potential. Thanks to its high liquidity, tight spreads, relatively low fees, and leverage options, the E-mini Dow is a popular instrument for intraday traders.

The screenshot below illustrates the potential opportunities available when trading Dow Jones Index futures.

The left chart shows a 30-minute chart with a Delta indicator and a customized market profile, offering insight into the overall market context. On the right, the footprint chart shows detailed data on trading volumes at each price level.

However, the following day, the price rose, providing the trader with an opportunity to enter a short position. The trader anticipated that the price would reverse downward from this identified level (a test of the high-volume level), where sellers had gained some control the previous day.

The footprint chart confirmed this trade setup. Despite market-buying activity (green clusters), the price was moving lower. This presented an opportunity to potentially earn up to $1,000 per contract (as indicated by figure 2) within a few hours, assuming the short position was opened and held until the daily low was broken.

While there is no guarantee of making a profit from trading Dow Jones index futures, you can greatly improve your chances by taking a structured approach: get proper training, develop a solid strategy, test it with historical data, and trade with discipline.

Set up the platform by following the instructions marked with arrows in the example below:

• Open a new chart.
• Choose the E-Mini Dow Continuous Contract – YM ticker.
• Switch the chart to footprint mode to analyze footprint patterns.
• Add professional indicators for volume analysis.

Example. The footprint chart below shows the intraday trading dynamics of the E-mini Dow futures.

You can spot similar patterns regularly. To practice, you can use the ATAS Market Replay simulator. This module of the ATAS platform recreates real trading conditions using historical data, enabling you to study the trading patterns of E-mini Dow futures (and other financial instruments) without any risk to real funds.

When practicing in the Market Replay simulator, you can:

• adjust the playback speed and pause;
• analyze footprint charts;
• use over 200 indicators;
• use Chart Trader and other features to trade on the Replay built-in demo account and then analyze your performance;
• use exit strategies.

1. Open a chart of a financial instrument.
2. Click on the Market Replay button in the main ATAS menu.
3. Activate the Replay mode (the icon should turn green).
4. Adjust settings (date and data type).

Start the replay and look for entry points using volume analysis tools. To open the trading panel, click on Chart Trader in the bottom-right corner.

What does Dow mean?

Dow is the surname of Wall Street legend Charles Dow, who is considered the founder of technical analysis. He created the Dow Jones indices and started publishing the Wall Street Journal.

What is the current Dow Jones index?

You can find this information easily in a few ways. One of the quickest is to simply search on Google, where you will get the latest index value and an updated chart in the quick answers section.

How does the Dow differ from the S&P 500?

Unlike the Dow Jones, which is based on the stock prices of 30 companies, the S&P 500 includes 500 companies and is weighted by market capitalization. This makes it a more accurate reflection of the U.S. economy and is used more often by investors and analysts.

What are Dogs of the Dow? 

The Dogs of the Dow are the ten stocks with the highest dividend yield.

Where is the Dow Jones Index traded?

The Dow Jones index futures are traded on an exchange within the CME Group.

When can you trade the Dow Jones Index?

According to the exchange’s specifications, Dow Jones futures can be traded 24/5, with a brief pause around midnight.

How Much Do You Need to Start Trading Dow Jones Futures?

The required amount is quite reasonable, especially considering there are two types of contracts, as outlined on the AMP Futures broker page (you can connect the ATAS platform to this broker):

• E-mini Dow: To open an intraday position, your account with the broker must have at least $500*.
• Micro E-mini Dow. To open a position without holding it overnight, only $50 is required.

*The broker may change the terms of service for traders.

✔ Reflects the performance of the largest and most stable U.S. companies.

✔ Great for analyzing long-term market trends.

✔ Offers a futures contract with favorable conditions for intraday trading.

✘ Covers only 30 companies, which limits its representativeness.

✘ It is based on stock prices, without accounting for market capitalization.

Download ATAS. Once you install the platform, you will automatically get the free START plan, which includes cryptocurrency trading and basic features. You can use this plan for as long as you like before deciding to upgrade to a more advanced plan for additional ATAS tools. You can also activate the Free Trial at any time, giving you 14 days of full access to all the platform’s features. This trial allows you to explore the benefits of higher-tier plans and make a well-informed purchasing decision.