Brokers for Trading the Dow Jones

The Dow Jones Industrial Average (DIJA) represents the companies that are based only in the US and is a barometer of the US economy, its businesses, and the consumption trends in the country. It is an index that helps investors determine the overall direction of stock prices. You can choose to buy and sell the shares of individual companies listed on the Dow Jones, or track the performance of the index as a whole. Either way, you will need a Dow Jones broker to get started.

What is the Dow Jones Index?

The Dow Jones Industrial Average (Dow Jones) is a stock market index that includes 30 of the most prominent companies that are listed on New York Stock Exchange (NYSE) and the Nasdaq Stock Exchange in the United States. Companies on the Dow can be merged and failed companies or those that no longer meet the requirements listed above are dropped from the Dow Jones Index.

The Dow Jones index is comprised of some household names who are widely considered to be the biggest and best in their respective industries. These include Apple, Microsoft, Nike, Coca-Cola, Boeing, Disney, McDonald’s and Johnson & Johnson, among others.

The index is maintained by S&P Dow Jones Indices, an entity majority-owned by S&P Global. Its components are selected by a committee. The ten components with the largest dividend yields are commonly referred to as the Dogs of the Dow.

The individual stock prices of all DJIA constituent companies are added together and after that divided by the “Dow divisor”. The divisor is not fixed but updated from time to time to reflect mergers, stock splits, spinoffs, or other modifications.

How can you trade the Dow Jones Index?

As DJIA is not an individual company, there are no stocks that you can buy. Trading the Dow index is done through derivative instruments including exchange-traded funds (ETF’s) and contracts for difference (CFDs). The other option is to buy stocks of all the 30 DJIA constituents but that would serve the same purpose.

You just need a trading account with a broker that supports the Dow Jones index. They will provide you with a trading platform that you can use to speculate on the Dow Jones price using financial derivatives.

Whilst you can’t invest in indices directly, you can capitalise on their price movements by trading financial products that reflect their performance such as Contracts for Difference (CFDs).

If you think it is going to go up in price, you can place a long trade (buy). On the other hand, if you think it is going to go down in price, you could place a short (sell) trade. The difference in price between when you open and close the position is your profit or loss, after any brokerage fees.

In addition to CFD trading, there are Dow Jones ETFs which track the performance of the Dow and can carry low expense ratios, making them a popular option for buy-and-hold investors.

ETFs or “exchange-traded funds” are exactly as the name implies: funds that trade on exchanges, generally tracking a specific index. When you invest in an ETF, you get a bundle of assets you can buy and sell during market hours—potentially lowering your risk and exposure, while helping to diversify your portfolio.

Dow Jones vs S&P 500

The Dow tracks the value of 30 large companies which tend to be blue-chip firms that are household names. The S&P 500 tends to be broader, hoping to have a bigger representation of companies from various sectors and industry groups.

Due to the Dow Jones index including only 30 companies, there could be an argument to suggest that the S&P 500 is a better representation of the overall US economy because it includes 500 companies. The potential downside to having more sectors included in the index is that the S&P 500 tends to be more volatile than the Dow.

Dow Jones vs Nasdaq 100

The Nasdaq mainly comprises companies in the technology sector or the companies in the growth stages while Dow Jones is more about the stock price and is hence dependent on the earnings. If the stock price drops, less weight will be given, and the stock may no longer be a part of the index.

A key difference between The Dow and the S&P 500 is the method used to weight the constituent stocks of each index. The Dow is price-weighted. This means that price changes in the highest-priced stocks have greater impact on the index level than price changes in the lower-priced stocks.

Who are the best brokers for trading the Dow Jones?

Trading brokerages can play a key role in Dow Jones trading. These brokers act as intermediaries who directly interact with clients and connect buyers and sellers to perform transactions with the index via provided trading platforms.

In order to use a broker for trading the Dow Jones, you will need to pay a small commission fee. You should shop around to see which broker has everything you are looking for. Some things to be aware of include trading costs, account types, execution policy, platforms, tools, funding options, regulation and support.

You can see some of our best Dow Jones brokers below, based on many years of research and hundreds of brokers that we have reviewed.

Broker
Rating
Regulated
Min. Deposit
Founded
Max. Leverage
1.
AvaTrade Review

ADGM FRSA, ASIC, BVIFSC, CBI, FFAJ, FSCA, IIROC, JFSA

$100

2006

1:400

Between 74-89% of retail investor accounts lose money when trading CFDs with this provider.
2.
IG Review

ASIC, BaFin, CFTC, DFSA, FCA, FINMA, FMA, FSA, FSCA, JFSA, MAFF, MAS, METI, NFA

$250

1974

1:200

76% of retail investor accounts lose money when trading spread bets and CFDs with this provider.
3.
Pepperstone Review

ASIC, BaFin, CMA, CySEC, DFSA, FCA, SCB

$200

2010

1:400

Between 74-89% of retail investor accounts lose money when trading CFDs with this provider.
4.
IC Markets Review

ASIC, CySEC, FSA, SCB

$200

2007

1:500

Between 74-89% of retail investor accounts lose money when trading CFDs with this provider.
5.
XM Group Review

ASIC, CySEC, DFSA, IFSC

$5

2009

1:888

Between 74-89% of retail investor accounts lose money when trading CFDs with this provider.
6.
City Index Review

ASIC, FCA, MAS

$100

1983

1:200

Between 74-89% of retail investor accounts lose money when trading CFDs with this provider.
7.
Forex.com Review

ASIC, CIMA, CFTC, FCA, FSA, IIROC, JFSA, NFA, SFC

$100

2001

1:50

Between 74-89% of retail investor accounts lose money when trading CFDs with this provider.
8.
Markets.com Review

ASIC, BVIFSC, CySEC, FCA, FSCA

$/£/€100

2008

1:300

79.90% of retail investor accounts lose money when trading CFDs with this provider.
9.
BlackBull Markets Review

FMA, FSPR

$200

2014

1:500

Between 74-89% of retail investor accounts lose money when trading CFDs with this provider.
10.
FP Markets Review

ASIC, CySEC, FSCA, SVGFSA

$100

2005

1:500

Between 74-89% of retail investor accounts lose money when trading CFDs with this provider.

Conclusion: do I need a Dow Jones broker?

If you are looking to speculate on the price of the Dow Jones Index, then you will need a trading broker that offers the Dow Jones as a financial instrument. Ideally, they will also have plenty of individual stocks for you to trade, including those companies who form part of the Dow Jones. For traders who would like the ability to trade with leverage, a CFD broker could be an option. Just keep in mind that high leverage can not only increase potential profits, but also cause larger losses.


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