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DJI Index Futures - Tips For Trading

Are you interested in highly trending instruments? Then this articles is definitely for you! It will provide beginner traders with a clearer understanding of what are DJI futures, how to trade DJI index futures, as well as reasons why you should consider trading DJI index futures. Also you will find there a practical example you can use to trade DJI futures, and expert tips for trading with DJI index futures.

What Are DJI Index Futures?

DJI Index Futures (or Dow Jones Index Futures) are a type of futures contract which enable investors to speculate on what the value of certain things will be on the Dow Jones Industrial Average Market Index.

Index futures are a form of agreement between two traders whereby one trader wins, while the other loses. It is similar to a bet in this sense, however, it differs due to the fact that it is a legal agreement, with an obligation for one party to pay the other when the settlement date is reached.

Dow Futures are also a type of trading instrument that investors can hedge with, meaning that they can use it as a form of insurance to minimize the risk of their overall investment portfolio, by grouping it with and/or placing it against other investments they have made.

Index futures in general enable traders to purchase or sell contracts that are based on what they think the value of the financial index they are trading on will be on a specific date in the future. In trading, this is also typically referred to as 'speculating on price movements'.

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Reasons To Trade DJI Futures

Here we are going to number three points that prove why the DJI is a great idea for your trading portfolio.

  1. Reducing risk

As mentioned previously, futures are great for enabling traders to hedge their investments and manage their investment risk. Being able to minimize your investment risk can potentially enable you to trade with more capital and earn even higher profits, as long as the investments are placed effectively, and always take into account the risks (high market volatility and larger losses).

  1. Benefits of trading futures in general

Trading with futures enables investors to take advantage of increased leverage, reduced costs for trading, and more time to trade (i.e. longer hours to speculate on price movements).

  1. Trading on indexes vs other trading instruments

Moreover, with index futures such as DJI, investors can potentially minimize their risk even further in comparison with trading on specific commodities, components, businesses etc, since they are speculating on an entire index, which will contain many different businesses, organizations, and more.

For instance, the Dow Jones follows 30 different companies that are publicly-owned (also known as blue chip companies) and are traded on the NYSE (New York Stock Exchange).

Some of the most well known companies included on the Dow Jones index include Coca-Cola, AT&T, ExxonMobil, Wal-Mart, Hewlett-Packard, and Microsoft.

Companies experience highs and lows in their stock prices rapidly in today's world, but it's far less likely for all 30 companies to all experience the same stock price fluctuations, since they are from different industries. Therefore, this is a way that traders can somewhat protect themselves from sudden shifts in market volatility.

If you are interested in trading Dow Jones futures index CFD, it is important to remember that you will need to open a live trading account with MTrading.

Expert Tips On How To Trade DJI

Taking advantage of leverage

DJI futures use a multiplier that grants investors access to increased leverage. The multiplier allows traders to multiply their investment by a figure of 10 (this is typically referred to as '10 to one' leverage or 1,000% leverage).

To explain this further, let's suppose Dow Futures are trading at 5,000 USD, if you were to purchase one futures contract based on this price, it would have a value on the market of 50,000 USD. For each dollar (also referred to as 'points' in Wall Street) that the Dow Jones fluctuates (increases or decreases), the futures contract would increase or decrease by a value of 10 USD.

Riding in a bullish market

At the time of writing, the Dow Jones Industrial Average (DJIA) has been a 'bullish' market for a period of over nine years. This means that the market value is generally increasing, wherein the businesses' stock prices have been mostly increasing during this period.

Markets fluctuate all the time, but the prevailing trend can be mostly in one direction if the businesses included within an index are all performing well. This is understandable for the Dow Jones, considering the fact that it includes companies such as Coca-Cola, who typically always have an increasing stock price.

The reason this is useful for trading is because it makes trading futures contracts on this market more of a 'safe bet' in terms of the market moving in a particular direction. However, global recessions and other global events can always have a dramatic effect on the markets, therefore, it is always important to keep track of the news and worldwide economic events, in order to understand where the market's direction is likely to go (bullish or bearish)

Enjoying short-term market direction indicators

Futures prices can be a good indicator of the direction that the market is headed in upon opening. However, as market prices often rapidly change during opening hours (because of news developments, economic data releases, and large trades made by institutions and expert traders), so too will the futures prices.

Therefore, it's a good idea to think about having several futures contracts that are linked to opposing directions, as a way of further managing investment risk.

DJI Index Futures Trading Example

Trading DJI index futures and futures in general is pretty simple. As mentioned previously, it is an agreement between two parties, with one side speculating that the market value will increase, while the other speculates that it will move in the opposite direction, and decrease.


When the expiration date for the futures contract has been reached (otherwise known as the settlement date), whoever was wrong in their speculation must then pay the other party. Moreover, they are obligated to do so, as the contract is legally binding.

Futures contracts can be settled with cash, commodities, and other types of goods. Let's look at an example to further break this down:

Suppose that you have decided to go short (or 'short'/'short sell') on a DJI Index futures contract. Now let's suppose that the worth of the contract initially was 30,000 USD, with a standard contract size that enables you to have 10x the amount (due to leverage).

You arrive on the final settlement date and find that the DJI is now trading at a value of 30,800. This means that the value of your contract has appreciated, which means that when you multiply its worth by 10, you will now owe the other party 8,000 USD.

However, if the DJI decreased in value (let's say that it decreased to a value of 29,100), the other party would then owe you 9,000 USD, since the contract's value depreciated by 900.

Now that you have a better understanding of trading with DJI index futures, why not consider practicing what you have learnt with an MT4 live account with Mtrading? It's the perfect place to begin your trading career and hone your skills with the help of a personal manager and proper education, so that you are ready for trading the top-notch instruments with one of the best conditions in the market.

If you want to learn more about trading strategies, take a look at how beginners can start to use scalping, one of the most popular trading technique!This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.