Dow futures are futures contracts that are based on the Dow Jones Industrial Average (DJIA). DJIA is the index of 30 blue chip stocks that are traded on the New York Stock Exchange. Dow index is one of the most famous stock index in the world and everyday if you watch financial news like that on CNBC, you will hear about the performance of the Dow Index that day.
Futures trading is somewhat different than the traditional buy and hold investing. In futures trading you have to constantly monitor the price. if you do not than you will very soon receive the margin call from your broker. Dow Futures are based on the Dow Jones Index and the value of the Dow futures contract is equal to 10 times the value of the index at a particular point in time.
For example, suppose the Dow Jones Index value is 8500 points. The value of the Dow Futures contract will be $ 85,000. So Dow futures provide the traders an inbuilt lease of 10. If you are bullish on the DJIA, you can invest in the Dow Futures. Each point rise in the DJIA will translate into $ 10 profit for you.
Similarly if you are bearish on the DJIA, you can go short on Dow Futures contract. Again, each point decline in the DJIA index will give you $ 10 as profit. Unlike stocks, you can go short on futures contract without bothering about the uptick rule as none applies on the futures contract. This makes futures trading far superior for speculative purposes as compared to stock trading.
Now, futures trading is risky and if you are a buy and hold type of investor than you should stay away from futures trading. However, if you have an appetite for risk and can monitor the market consistently than you can profit handsomely from futures. Other futures contracts that are popular with traders are the S & P futures contract and crude oil futures contracts.
If you are into futures trading than you need to meet High Velocity Market Master, Mark Soberman. He has unique trading methods. He says that he only trades for 20 minutes each day.