- 1). Open and fund an account with an online broker that provides the tools for active trading. The Barron's 2010 Broker Review rates MB Trading, Lightspeed Trading and Interactive Brokers as top rated for frequent traders.
- 2). Download and install the broker's trading system software. Active traders use charting and trade signal software to help them decide when to enter and close trades. The brokers listed above will provide their own software packages for traders.
- 3). Set the trading software up to track the specific ETFs for trading the Dow Jones. If you plan to day trade, the Proshares UltraDow 30 (symbol DDM) can be used for Dow uptrend trading and the ProShares UltraShort Dow 30 (symbol DXD) for downtrends. Swing traders can use the un-leveraged Dow Diamonds (symbol DIA), and ProShares Short Dow (symbol DOG) to avoid the pitfalls of holding leveraged ETFs for extended periods of time.
- 4). Practice trading using the simulated money account provided by the broker. Trading-focused brokers will allow you to set up simulated and live accounts in your trading software so you can switch between the accounts. Purchase the long Dow Jones ETFs (DDM or DIA) to profit from an increasing DJIA and use the short ETFs (DXD or DOG) to profit from a falling Dow. Trade with the simulated account until you are comfortable with the software and your trading strategies.
- 5). Switch to your live money trading account to start generating real profits from trading the different Dow Jones-tracking ETFs. You can always switch back to the simulated account if you need to adjust your strategy or try new techniques.
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