Trading the Dow with Tom Loge'

Tom Loge' has just turned his attention to trading the Dow. He is one of the partners involved in TradersHelpingTraders.net and writes a daily market update before the fact for subscribers, as well as a weekly Big Weekend Edition. Tom is well known for his option strategies and unusual approach to trading the Gold and Bonds markets. Tom has been invited several times by the CBOT to share his strategies on their live webinar platform.

As I wrote earlier in this edition we will begin trading the Dow tomorrow. I'm devoting today's Education Page to setting the table for our launch tomorrow.

First, you can get all the salient details on the Dow by visiting the CBOT website or cut and paste this URL: http://www.cbot.com/cbot/pub/page/0,3181,1063,00.html

We will be trading the $5.00 mini Dow with a symbol of EYM. This symbol may vary from provider to provider. Consult your provider's symbol page to get the correct one for you. We will only trade during the hours of the full Dow contract open outcry session which runs from 7:15 am until 3:15 CST. We will be trading it on our electronic platform … same as with the Russell.

I'm hopeful we can do this without impacting our Russell trading but that may be wishful thinking. What is in our favor is that I will trade a much smaller array of numbers in the Dow. We'll see and adjust as necessary.

The point value for the $5 mini Dow is … $5 per point … so a move from 10941 to 10931 is valued at $5 X 10 points or $50. Currently margin is $2632 per contract. I KNOW for absolute, positive sure we will NOT be carrying anything overnight so you need to check with your broker to find out how you will be treated regards margin. We are, for all intents and purposes, daytrading.

In my own case I've committed and my clearing firm has agreed to $500 per contract as minimum account equity to trade. You want to have this agreed to in advance so you don't place a trade and have it blocked or impact another trade by putting you in a margin call situation.

We will be attempting to trade the DOW just exactly as we do the Russell. Some of you older subscribers will remember we started off last year doing both the DOW and Russell. This isn't then such a radical move as we did fine then as well but had no where near the frequency of trades as with the Russell, so I dropped it.

The Dow is the 30 largest, strongest "Blue Chip" companies whose stock is publicly traded. There is a "divisor" which takes into account stock splits, etc. so its value is not a simple arithmetic adding of the combined share price of each component company.

We'll see how this goes and I'll update you periodically as I see things to be careful of or any changes I make. Here are the numbers we'll use to kick off tomorrow:

11020, 11000, 10980, 10950, 10940, 10925, 10900, 10875, 10830, 10800, 10750, 10700, 10650, 10620, 10600, 10550, 10500, 10450, 10425, 10400 and 10300.

Wish me luck!