Perhaps the name most associated with the global stock market, the Dow is really named “the dow jones industrial average” and was founded Charles Dow in 1896, it is really an index not a stock exchange in itself (as is the common mistake), the index represents the success (or failure) of 30 large companies based in the US during the most recent trading session of the stock market.
In reality, many of the 30 companies now counted as part of the index do not have anything to do with heavy industries so the “industrial” portion of the name is often omitted.
While it’s primary and stated mission is to gauge and reflect the performance of the industrial section it has been known to be reflective of economic conditions that are external to that section – domestic and foreign political events such as conflicts, elections or wide-spread natural disasters are as likely to impact the index as are earnings reports or company acquisitions.
Having begun its operations over a century ago the DOW has been through a number of turbulent times, many of those times surrounding US and global financial events, and in some instances, the DOW’s reaction to market fluctuations for one of its core companies have even been credited with creating such crises.
There have been various events throughout the DOW’s history that have impacted it greatly – The 1929 crash known as “Black Tuesday”, the 1987 crash similarly titled “Black Monday”, the dot-com bubble bursting at the beginning of this millennium and most recently the US housing crisis and global financial crisis. The latter was the genesis of quite a few records for the DOW Jones – it’s biggest rises and declines both in points and percentages as well as biggest daily swings have all come since late 2008.
Perhaps the best example of the crisis can be viewed through the lens of AIG, the insurance giant saw its stock decline from $22.76 on September 8th to an abysmal $1.35 on October 27th, which was a major contribution to the DOW Jones losing about 3,000 points over that period.
And yet, in what may be the biggest testament to the US market’s resourcefulness and ability to keep progressing despite difficulties the DOW rebounded quite nicely from its latest near cataclysm by regaining all of its pre-crisis strength and even adding to it, reaching record highs as recently as September 2014.
With all of that in mind, you might be hesitant to trade in any Dow Jones binary options, but do not let those drastic movements deter you from your ambitions, even a market that is spiraling, seemingly out of control, represents an opportunity to the seasoned binary options trader, it is really about keeping track with two factors – the first being any reports concerning one of the 30 companies indexed in the DOW (while also keeping in mind that not all companies are “weighted” similarly, so a rise in VISA’s prices will cause a bigger shift in the market than a rise in Cisco systems would), those reports will directly impact not only the company in question but the DOW itself.
Secondly, as with most financial markets or indices, you should be with your finger on the so called “pulse” of global events which may have an impact on your position and its odds of success.
To the shrewd binary trader the rise or fall of the DOW is of little importance, position yourself correctly and you can easily avoid pitfalls and find yourself enjoying Mondays that are anything but black.