If you watch the nightly news, you have undoubtedly heard someone mention the Dow Jones Industrial Average (DJIA). The DIJA is often referred to as the Dow, and it’s the oldest and most closely observed indices in the world. When the news anchors report that the market has gone up or down, they are typically referring to the Dow.
Breaking Down The Dow
Designed to serve as a proxy for the broader U.S. economy, the Dow Jones Industrial Average was created in 1896. It was named after its founder Charles Dow and his business partner Edward Jones. The Dow is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange (NYSE) and the Nasdaq. Upon its launch, the DIJA included only 12 companies that were mainly industrial, such as:
The Dow typically makes changes when companies experience financial distress, or when a broad economical shift occurs. General Electric is the only one of the original Dow components that was still a part of the index in 2018. On June 26, 2018, General Electric was replaced by Walgreens Boots Alliance, Inc.
Index Calculations And Changes
The Dow is a price-weighted index; stocks with higher share prices are given greater weight. The first Dow calculated the average by adding the prices of the 12 Dow component stocks and dividing by 12. Over time, adjustments have been made to account for splits and mergers to keep the value of the index intact.
In the first few years, up until the Great Depression, there were many changes to the Dow components. The index grew to 30 components and has changed components 51 times. Eight stocks were replaced in 1932, and this is when the Coca-Cola Company and Procter & Gamble Co. were added to the index. These two stocks are still part of the Dow in 2018.
Historical Dates And Milestones
Below are several important dates that every trader should know.
- March 15, 1933. The largest one-day percentage gain in the index totaled 15.34 percent. The Dow gained 8.26 points and closed at 62.10.
- October 19, 1987. Known today as Black Monday, the Dow took the largest one-day drop in history, falling 22.61 percent, with no evident explanations behind the crash.
- September 17, 2001. When trading resumed after the 9/11 attacks in New York City, the Dow dropped 684.81 points, or 7.1 percent, in one day. By the end of the year, it recouped its losses and closed above the 10,000 mark.
- May 3, 2013. The Dow surpassed the 15,000 mark for the first time in history.
- January 26, 2018. The index hit its current record of 26,616.71.
Understanding terms, history, calculations, and changes to the Dow Jones Industrial average can lead any trader to better business practices. Being aware of trends and practices can make your business more competitive in the field. And remembering where it all began can help traders keep perspective to the end.
US LAW requires trading and trading education accompanied to post legal disclaimers as to market and personal performance, as well as investment risk. Please carefully read and study the Legal section of this website and any agreement you sign. Any agreement to doing business with SP500Trader.com website is verification that you have read, understand, and agree to the terms of risk associated with futures trading and financial investing as described.
Important Futures Trading Disclaimer
Trading futures and options involves the risk of loss. Please consider carefully whether futures or options are appropriate to your financial situation. Only risk capital should be used when trading futures or options. Investors could lose more than their initial investment. You must review customer account agreement prior to establishing an account.
Past results are not necessarily indicative of future results. The risk of loss in trading can be substantial. Carefully consider the inherent risks of such an investment in light of your financial condition. Though proper education, tools, and practice are necessary, they do not guarantee profitable results.
SP500Trader.com and the Delta Trading Group, Inc. are educational entities; be sure to consult with your financial advisers, brokers, and other professional services about the risk of trading. Though we offer a common language to learn about trading and risk, we are not a signal service. You must use your own discretion when doing any kind of trading in the any financial market. SP500Trader.com and the Delta Trading Group, Inc. are not responsible for interpretation, opinions, or losses by its members, liaisons, instructors, mentors, vendors, contractors, or administration, as none of these entities can guarantee your success.
Internet Trading Risks
There are risks associated with utilizing an Internet-based deal execution trading system including, but not limited to, the failure of hardware, software, internet connection, or services provided by third parties. Since SP500Trader.com and the Delta Trading Group, Inc do not control vendor signal power, its reception, or routing via Internet, configuration of your equipment or reliability of its connection. We are not be responsible for communication failures, distortions, or delays when trading via the Internet.
Accuracy of Information
The content on this website is subject to change at any time without notice, and is provided for the sole purpose of assisting traders to make independent investment decisions. SP500Trader.com and the Delta Trading Group, Inc have taken reasonable measures to ensure the accuracy of the information on the website. The company does not guarantee its accuracy, and disclaims liability for any loss or damage which may arise directly or indirectly from the content or your inability to access the website, for any delay in, failure of the transmission, or the receipt of any instruction or notifications sent through this website.
This site is not intended for distribution, or use by, any person in any country where such distribution or use would be contrary to local law or regulation. None of the services or investments referred to in this website are available to persons residing in any country where the provision of such services or investments would be contrary to local law or regulation. It is the responsibility of visitors to this website to ascertain the terms of and comply with any local law or regulation to which they are subject.
Your broker may have a contractual agreement not to seek redress for slippage, it’s obligation to execute stop loss orders at the stop loss price or better, will not apply to limit and stop loss orders during hours when it is closed. This also does not include bad price spikes. Bad price spikes are removed from the price charts quickly to alleviate confusion.