Trading Indices involves buying and selling the changing price of Stock markets such as the FTSE 100 or the S&P 500.
- Indices typically include the largest companies listed on a particular Stock exchange
- Indices are good indicators of market trends because they add up the price movements of all the companies within each Index
- Indices move more slowly than individual companies and are generally more stable in terms of price movement
Indices Analysis and Insights
- European Equity Market Handover – 18th April 2019 April 18, 2019 1:29 PM
- FTSE slides on Asia, Wall Street cues April 18, 2019 12:42 PM
- Daily FX Technical Trend Bias/Key Levels (Thurs 18 Apr) April 18, 2019 5:33 AM
- Featured Trade: Minor pull-back in progress for Nikkei 225 April 18, 2019 4:03 AM
- FTSE still struggles at 7475: Gold drops April 17, 2019 5:35 PM
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What is a financial Index?
Every Stock exchange has its own Stock market Index, usually calculated in real-time. The Index represents how well Stocks listed on an individual exchange are performing. For instance, London has the FTSE Index, composed of the 100 biggest companies by market value traded in London, but also a set of smaller Indices such as the FTSE 250, FTSE 350 and FTSE AIM.
Well-known global Indices include the Dow Jones Industrial Average, the S&P 500 and the Nasdaq in New York. The DAX30 based in Frankfurt, Hong Kong’s Hang Seng Index and the Nikkei 225 representing Japanese Stocks.How well an Index performs depends on all the companies listed on that Index. Individual stock exchanges tend to review the composition of an Index once a year - and adjust it depending on whether companies in the Index have become smaller or larger.
When Index trading you trade the price of the Index itself – you don’t need to buy and sell the Stocks in the Index.
Most indices focus solely on the stocks in a given country but not all. The S&P 500 for instance includes global Stocks. Some focus on specific industries - like the NASDAQ, which only includes technology Stocks.
When trading a financial Index it is important to keep an eye on wider events that can become Index news. For example the Share price movements of big companies in the Stock market Index, or changes to its constituents, the individual companies which compose it.