How to Trade Dow Futures on Regulated Broker Platforms

What is Dow Futures?

Dow Futures is a contract to buy or sell the Dow Jones Index at a certain price at a specific time in the future.

These Dow Futures contracts can be settled for profits in cash, which is the whole goal.

Futures contracts generally entail entering into an agreement to execute buy or sell trades at a given price at a specified future time.

Futures contracts may be applied to a variety of assets such as commodities, stocks, and Indices.

Dow Futures are based on the Dow Jones Index, which tracks the performance of over 30 stocks in the U.S.

Trading the Dow Futures contracts which track the performance of many different stocks is less risky than trading single stocks.

This is because the risk is spread across the different stocks in the index.

While changes in a single stock may be difficult to tame in case of a losing trade. It is also easier to speculate on the future movement of the broader stock market.

Trading Dow Futures.

Trading Dow Futures involves placing orders on the stock market in the direction which you anticipate the price of the Dow Jones Index to move.

This is actually a common way of trading the general stock market in the United States.

It is worth noting that Dow Futures are listed quarterly and expire in the months of March, June, September, and December.

At expiration, these contracts are settled in cash which equals the value of the index and not the individual stocks.

Here is How to trade Dow Futures:

  1. Open a Dow Futures Trading Account.

You need to open a trading account with a broker that offers futures trading which includes Dow Futures.

After that, you may require to be authorized to trade futures because not all brokers out rightly allow futures trading.

Such a broker must be well experienced with many years of market experience and well regulated.

That way, you can trust the broker with your money.

Brokers usually charge commissions for futures trading. Therefore, look for a broker that charges favorable and affordable commissions.

A suitable broker must always provide you with a user-friendly platform and interface for analysis and execution of trades.

You may also need a way you can reach them for queries and complaints if any.

Fundamental and technical analysis is the core of the Dow Futures trading.

That means, your broker should offer you news for fundamental analysis from time to time. In equal measure, they must also provide chart analysis tools for technical analysis.

Suitable brokers of this manner which meet the basic requirements include:

  • TD Ameritrade.
  • E*Trade.

Open a Futures Trading Account with them.

  1. Download the Broker Platform.

Most Registration and signing up with brokers is usually on the browser. You will therefore require software for PCs or a Mobile App for Smartphones to access the markets.

Mobile Apps for most brokers are available on Google Play Store for Android devices.

Alternatively, you can get them on the Apple App Store for IOS devices.

Most brokers have PC software compatible with both Windows and macOS, therefore you have no reason to worry. Just find out which versions your preferred broker offers.

  1. Devise a Dow Futures Trading Strategy.

How to trade dow futures

It is obvious that almost all brokers will offer you a free demo account to practice trading.

It is such an account that you will use to develop a trading and money management strategy for your Dow Futures Trading.

There are so many trading strategies out there.

It is up to you as a trader to determine what works and what doesn’t.

Do you trade breakouts, support, and resistance, moving averages, candlestick patterns, or price action?

Is the use of proper Risk to Reward ratio in conjunction with Stop Loss and Take Profit Orders something you would take for risk management or you’ve got another?

It is what works for you that you will settle for.

It is till then that you can proceed to make money by trading Dow Futures on a live account.

In addition to all that, get familiar with the broker platform by knowing all buttons.

Learn how your broker platform works and the ease of trade execution.

Gauge whether such a platform is suitable for you or not, so that you can make the necessary adjustments beforehand.

  1. Deposit money in real account.

Have you become familiar with the broker platform and established that you want to trade Dow Futures with them? 

Go ahead and deposit enough money depending on what your trading and risk management strategy requires.

Know which payment methods your broker supports to prepare accordingly.

  1. Trade Dow Futures.

Do you anticipate the Dow Jones Price to go up according to the signals generated by your analysis and trading strategy?

Then simply buy the Dow Futures contract.

If you, however, anticipate that the Dow Jones price to dip, you can only profit by selling the Dow Futures contract.

Note that you will be entering the Dow Futures contract in any month you want to trade.

Most market movers will trade the month with the closest expiry date.

Dow Futures expire in the months of March, June, September, and December.

While trading Dow Futures contracts, take note of the following:

  • You need enough capital in your account to cover for both initial and maintenance margins. If your account stoops below the maintenance margin, the broker may require you to deposit additional funds or adjust trade positions accordingly.
  • For maximum gains, futures contracts including Dow Futures should be highly leveraged. Take note that you also need to be sure of the price direction because leverage incurs as huge losses as delivers profits.
  • You can close an open trade by entering a trade with the same specifications in the opposite direction. You can achieve partial trade closure in the same manner by reversing only some of the trades and leaving others to run.
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