Dow Jones Index

In 1896, the Dow Jones index was founded by Charles Dow and was named after him and one of his associates Edward Jones who was a statistician.  It was used to represent the dollar average of the stocks from twelve major American companies.  These days the Dow Jones index is used to show how thirty companies are trading on the stock market.  This is one of the main indicators of the movements in the market along with S&P 500 and NASDAQ.  The three make up the SMIS (Security Market Indicator Series).  The Dow Jones index can often be referred to as the Dow 30 because of the thirty companies.

The Dow Jones index was quite different to how it is today when it was first founded.  For example it was not possible to forecast trends because there was no way of telling how the market was moving.  This was because they did not have the same theories or technical indicators that we have now.  Back then it would not have been so easy to profit from a stock pick.

These days, however, we have come to rely upon stock charts because they allow us to perform analysis on the stocks so that it is possible to determine when and where prices might reverse.  If this information was not available then there would be no way to predict that stocks would rise without going on the say so of the company owner who told you that they had had a good accounting period.  The Dow Jones Index was responsible for major changes in the way stocks and shares could be tracked and it also gave us new ways of forecasting.

Many investors who are trading stocks on the index will be given the opportunity to invest in exchange traded funds.  This is good for investors because it means that their risk is reduced due to the fact that the fund is not solely dependent on one stock’s performance.  So if one stock is not performing well, you can still make a profit based on the performance of the other stocks in the fund.

If you are thinking of investing and starting to trade on the Dow Jones index, it would be wise to make a point of doing some research into the past movement of the index.  There are four phases that the markets go through in their cyclical movement.  It is possible to predict where trends will end and another begins by analysing things technically.  You will not benefit from a bearish market no matter how good your stocks are. The best thing to do is to wait until the bulls are about to step in when the prices are low if you want to invest.