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What is US30 in forex?
The US30, also known as Dow Jones 30, DJ30, the Wallstreet 30, or just the Dow, is one of the largest and most renowned stock market indices in the world.
Charles Dow, of Dow Jones & Company and a Wall Street Journal editor, established the stock market index in 1882. But the indices calculation didn’t happen until May 26 1896.
That makes it one of the oldest stock indices worldwide.
The question is, what is US30 in forex used for?
What is US30 in forex?
The original purpose of creating this stock market index was to track the movements of America’s largest industrial corporations. Today, it represents 30 of the largest companies that are quoted on the US stock exchange.
The US30 is a strong indicator of America’s economy.
It’s also considered to be one of the world’s most-watched and regularly cited stock indices.
The 30 blue-chip stocks included in the Dow’s listing show the entire stock market’s performance across various sectors. That is, except transportation and utilities. The US30 represents sectors including healthcare, technology, and consumer services.
Some of the world’s largest brands are included in the index. For example, Nike, Coca-Cola, Apple, Intel, Johnson & Johnson, and Microsoft.
Price drivers and indicators
The US30 stock market index is driven by major economic factors. These macroeconomic factors influence the US dollar’s value and strength. If you didn’t know, forex traders who trade the US30 constantly look at macro events. For example, the unemployment rate, political events, and inflation.
The list goes on…
US non-farm payrolls – a macro event that happens once a month – is one of the most important events for determining which way the US30 will move in the future. If the US non-farm payrolls number beats expectations for the month, chances are the US30 will go up.
US Federal Reserve decisions, made by the Federal Open Market Committee (FOMC), also impact the companies in the Dow Jones. If the Fed announces that it’s going to print more money, the stock market will likely go up. That’s happened time and time again over the past 10 years.
Remember, since the US is the world’s largest economy, and the US dollar is the world’s reserve currency, the forex market can be influenced by the Fed’s actions. That’s why forex traders pay close attention to the Fed’s policies – especially forex traders who trade the US30.
Fiscal (government) and monetary (central bank) policy changes impact the US30. That’s because the policy changes directly affect the companies in the index. Since the Dow Jones Industrial Average (US30) only consists of 30 companies, it only takes one large company (i.e. Apple) to impact the whole index.
Remember, the US30 is a price-weighted index…
The value of the US30 (i.e. 30,000 points) is influenced by the changing prices of the 30 companies in the index. Most indices’ values are determined by company weight. For example, the S&P 500. That means, if a company has a larger market capitalisation, it contributes more weight to the index.
The US30 mainly represents international capital, since it consists of the world’s biggest brands. The S&P 500 is a domestic index followed mainly by US citizens, and consisting of leading US companies. That said, global capital follows both indices, since they both consist of mega-corporations.
So, what’s better for forex trading?
It comes down to personal preference…
I prefer the US30.
Although the S&P 500 is the most heavily traded market in the world, the US30 is awesome to trade. The US30 is US$1 per unit. So every one-point move equals $1. So if you’re trading 100 units, each point is US$100.
You will often see moves of 100 points on the US30.
During the 2020 coronavirus panic, the US30 often moved by 2,000 points in a day! If you had gone ‘short’ one unit of the US30 and held it during a 200-point move, you would have made US$200.
It was a great time to be a forex trader.
Forex traders also love to trade the S&P 500, since each point is US$50 per unit. The S&P 500 index also moves slower than the US30. But since each point is worth US$50, forex traders love trading it.
Your ‘Start With Forex’ takeaway: What is US30 in Forex
The US30 is a leading global economic barometer.
That won’t change any time soon.
Remember, when you’re trading the US30 in forex, traders should keep track of the financial forecasts and company reports of the indices’ major contributors. The reason is, as stocks and industries fall in and out of favour, the US30’s value changes with time. History shows that certain companies are more attractive than others at certain times, and therefore present better opportunities.
You should stay up to date with market trends to find trading opportunities. Some major market trends that impact the US economy include global economic statistics, government policies, terrorism, crude oil prices, and the US-China trade war.
The ‘Start With Forex’ message: Just follow the trend.
The US30 in the context of forex isn’t that hard to trade. Don’t make your life difficult by fighting the trend. Remember, the US30 gives forex traders a snapshot of what’s happening with the world’s leading companies in the US stock market.
If you want to learn how to trade forex like a professional, start by reading our FREE forex course. Remember, there’s a million ways to make a million bucks in the forex markets. So if you want a head start in forex trading, alongside our free course, check out our approved products page for forex trading signals and systems to help kick start your trading.
To your trading success,
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