No matter the controversy, you can not ignore the fact that Dow Jones Industrial Average stock market index holds an unparalleled significance in the stock market. Hailed as the financial barometer ever since its inception in 1885, at the time when stock investors were still buying bonds, DJIA is still the most looked upon stock market index in the world.
The stock included in the DJIA are of those companies that are of national economic significance. Despite tracking stock of only 30 companies, DJIA is the most talked about the stock index, preferred over the NASDAQ and S&P 500 INDEX who track a significant number of stocks and international equities.
If you are interested in making a career as a stock investor and want to understand your way about the DJIA stock market index, read the following to understand better and implement smart investment choices:
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DJIA signifies the average of stocks calculated by multiply the number of shares acquired at each price by that price, add those values and then divide the total value by the total number of shares.
The points in Dow Jones signify dollars.
If you happen to be remotely interested in stock and investment, you would be aware of the importance of keeping a track on the historical trends as well as the latest trend, by utilizing technical analysis tools. Stock market trading trend help in predicting the future price movement. DJIA is a unique stock market index with comprehensive historical stock data of centuries to enhance your stock’s fundamental performance.
DJIA is a price-weighted index. Greater weight in the index was given to share with higher prices. Earlier simple arithmetic was used to calculate the average, which was then replaced by computers in 1963. With the introduction of electronic technology, now a real-time calculation can be done as the market is trading. Now, the sum of components stock is calculated by the exceptional divisor.
The exceptional divisor, referred to as the Dow Divisor helps in keeping Dow Divisor consistent and not get affected with one-time fluctuations. It smoothens the splits, dividends to keep the index consistent.
Charles Dow was clever in denoting every dollar as a point. As of now, Dow divisor value is 0.14523396877348. Every time there is a dollar change in the price of the constituent stocks, the value of the index moves inversely. The divide values hold until there is any change in the number of components affecting prices.
Options are an ultimate trading tool. By buying or selling one DJX option, you can control one one-hundredth of the total value of the Dow 30, so a minor movement can lead to a significant profit or loss.
Since DJIA has stock of the most economically influential stock companies of US, a minor fall in the stock value could lead to a market crash. The decrease in overall DJIA value could result from small declines in the value of many Dow stocks, or because of a significant reduction in the value of only one or two shares.
Similarly, improving the health of stock values in DJIA will significantly enhance the economy.
As mentioned before, DJIA includes stocks of economy influencing companies. If Dow falls minutely, stock investors can leverage this opportunity to their benefit by purchasing stock. But a significant decrease in Dow could lead to curtailed economic growth, increasing unemployment rates.
There is a reason why despite an increasing number of naysayers, successful investors understand the importance of DJIA stock charts. It will be in your best interest if you seek the help of an investment research company like Securities Research. We have accurate DJIA historical stock data that will enhance your stock’s fundamental performance.
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