The Dow Jones Industrial Average, also referred to as the DJIA or more commonly the Dow Jones, is a price-average index of 30 different stocks that trade on the New York Stock Exchange and on the NASDAQ.
It contains mostly blue-chip companies from the stock market that have a large market cap. The Dow Jones has been around since 1896 when Charles Dow created it and is named after him and his business partners Edward Jones.
It is considered one of the most watched indices in the world and often a benchmark for how the US economy is performing.
Diving Deeper Into The Dow Jones Industrial Average – DJIA
The index contains some of the biggest names on the street including: Microsoft ($MSFT), Nike ($NKE), Apple ($AAPL) and Boeing ($BA) to name a few.
When it was initially created it was designed to be a benchmark for the economy but as time has moved on the index has had to make changes based on companies financials and relevance to the broader market.
The index was started with only 12 companies that were mainly industrial companies but has since added 18 more covering a larger range of industries.
The index is known as a price-weighted index, which means that stocks with a higher price per share are given more weight in the index. However, this wasn’t always the case.
It use to be a straight up average between the stock prices but as time moved on and companies with through mergers and splits that needed to be accounted for in the index pricing so they added the price-weight factor into the calculation.
Warrior Trading Pro Tip
Stocks in the Dow Jones are big companies that can have a major impact on our economy and the overall market, and is why it is a good index to follow even if you don’t trade them. This way you can get a larger perspective on what is going on in the market and what is moving it.