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Market Spotlight: E-Mini Dow

Updated: Jan 24, 2023



What are E-Mini Dow Futures? Normally small account retail traders wouldn’t have the capital to trade the DOW market . However, thanks to the E-Mini Dow, which is one half the size of the regular Dow, small account traders have the chance to trade one of the most widely tracked stock index’s in the U.S. The YM trades at $5.00 per tick/$20.00 per point. Its traded on the Chicago mercantile exchange.

E-Mini Dow (YM) Highlights

Low tick cost- One of the most attractive aspects of the YM is the $5.00 tick/$20.00point. This lets traders with small accounts trade comfortably. Fair trading: The YM is traded on the Globex platform which gives retail traders with smaller accounts a fair chance at trading the market. Trades placed on the ES don’t prioritize different types of accounts, so orders are placed in a first come first serve basis. Flexibility/High Volume: Possibly the strongest reason for trading the YM over the ES or NQ minis is the Low tick size of $5.00 compared to $12.50. For new and or small account traders this means you have more options to how you trade. Stops can be wider, and you can trade with multiple contracts if you wish. Unlike the NQ however the YM has volume (and volatility) similar to the ES. This means the YM has the lower tick size of the NQ with the movement and profit taking opportunities of the ES. Less Tax Heavy: Trading E-mini futures you only need to report your net profit for that year, instead of each trade. Low Margin Requirements: Even traders with smaller accounts around $5000.00 can participate in trading the YM.

What moves the E-Mini Dow Industrial futures market

The DOW is comprised of 30 high value companies that are well known, established companies that usually lead one of the nine sectors of the US economy. These companies vary from Media giants such as Disney to Pharmaceutical powerhouses like Pfizer. When looking at market movement in the E-Mini Dow its important to understand that the DOW is a price-weighted index, in short it means that each of the thirty companies in the DOW are “weighed” in relation to their price per share. So what we are looking for is the companies in the DOW that have the highest stock prices. A quick google of “DOW weightage chart” will show us the “heaviest” companies.

At the time of writing the top five companies consist of Boeing Company, United Health Group Inc, Goldman Sachs Group Inc., Apple Inc., 3M Company. We want to pay attention to the top five or ten companies that have the most weightage in the DOW market, news from and about these companies will have a definite impact on the DOW. We also want to keep watch on important economic events that talk about the US economy as a whole. Unlike the NQ the YM and ES contain financial companies so reports that effect interest rates like FOMC meetings will greatly impact the E-Mini Dow.

The following are reports and events you want to watch out for:

  • Gross Domestic Product (GDP) report: This helps measures the nation’s income and expenditure. Includes all total costs for goods and services produced but the country.

  • Unemployment Reports: This affects the Fed Policy’s and reflects the strength of the economy.

  • Non-Farm Payroll: A report issued monthly showing changes in payroll of all jobs in the U.S. excluding farm workers, private household employees and non-profit organizations.

  • Production Reports: The Federal Reserve releases a report monthly on the industrial production. This includes the raw amount of goods produced by industrial methods such as factories, mines and utilities companies. The Feds watch this closely as it’s an early sign of how the economy is doing.

  • CPI (Consumer Price Index): Issued by the U.S. Department of Labor, this Monthly release shows inflation through the average price of goods and services the general public consumes. This includes food, automotive fuel and Medical Care.

  • FOMC: The Federal Open Market committee holds regular meetings throughout the year. The report covers a huge range of data, including Economic Projections and lowering or increasing interest rates. An FOMC meeting will almost always cause a stir across all markets, especially in the E-Mini Dow. You’ll want to be aware of your position during an FOMC meeting as volatility will usually be sporadic. Many retail traders usually steer clear of entering the market during an FOMC meeting.

Conclusion

The E-Mini Dow Jones Industrial offers the lower tick size of $5.00 a tick (similar to the NQ) with volume on par with the ES. These factors together make the Mini Dow an attractive choice for a beginner day trader that wants to avoid the sometimes-low volume of the NQ but doesn’t want to trade with a $12.50 tick price of the ES. Keep in mind the DOW is a price weighted index, so news that directly affects the top companies in the DOW will usually have a bigger impact than it normally would in other markets. Unlike the NQ the Dow contains financial companies so FOMC meetings and similar economic events that affect the economy as a whole will have a heavier impact.

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