Trading Binary Options With the Dow Jones Index

Binary Options University July 7, 2014 DOW Jones Index Trading

There are three primary indices within the United States market, one of which is the Dow Jones Industrial Average. Binary options traders often find it easy to profit from index trading due to the fact that there are plenty of market reports that impact their value and make direction forecasting a simpler process. Although the U.S. indices can be quite volatile at times, more often than not, the prevailing investor sentiment is quite clear.

No other index highlights economic conditions within the United States quite like the Dow Jones. Whenever this index value is trending up or down, traders can be sure that some recent data has swayed investor sentiment and is the driving force behind the price push. There are many factors that can can cause this index to rise or fall, which means that knowing what to look for in terms of economic data reports is going to be extremely important.

The first concern should be the exact hours during which the Dow Jones Industrial Average is open for trading. This will be from 13:30 GMT to 20:30 GMT. The market is open Monday through Friday (major U.S. holidays excluded). This index is often quite active just prior to opening and just before closing for the day. Keep this in mind when planning out binary options trades in advance.

The key economic data that can influence the value of the Dow Jones index include:

  • Manufacturing data
  • Employment and unemployment data
  • Gross Domestic Product
  • American consumer sentiment data
  • Housing data (existing sales, new construction, etc.)
  • Crude oil prices
  • Changes to primary lending interest rates
  • Earnings reports (for companies included in the index)
  • U.S. credit rating changes
  • Particular attention should be payed to employment data because it is known for really driving the price of the Dow Jones. Whenever unemployment is high, this index typically suffers a drop in value. Manufacturing data is linked to employment data, as is consumer spending. When manufacturing numbers are high, watch for consumer sentiment numbers to increase. Whenever U.S. residents are feeling positive about current economic conditions, they become willing to spend more, thus causing further improvements in conditions.

    Out of all the major indexes, the Dow Jones is the last to open for the day. In fact, this index does not open for trading until both the Asian and European marketplaces have been open for quite some time. This actually places traders of the Dow at an advantage because it allows for a general assessment of the sentiment within the global markets. Quite often, specific markets are impacted by movements within other markets. While this can hold true for the Dow, note that is it most impacted by the events taking place within the United States.

    Fundamental analysis must be completed along with each trade that involves the Dow Jones Industrial Average. An economic calendar can be used to track the dates and times of specific economic data releases. When actual data does not line up with what market analysts expected, be prepared to enter into one or more binary options trading using this index as the chosen underlying asset.

    ***Your capital may be at risk. This material is not investment advice.***