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An index is an indicator that measures the price evolution of a group of stocks on an exchange. For example, the Nasdaq 100 Index tracks 100 technology companies with significant market capitalization on the New York Stock Exchange. A trading index allows you to contact the entire economy or industry at once, and only need to open a position.
The stock indices is part of the market shares. Investors use it to compare the returns of different assets, keep track of the overall economy, or as an investment tool. The most common types of indices include global indices, regional indices, and country indices.
Stock indices represent the value of a group of underlying companies that are publicly traded. A stock index tracks a group of stocks to measure the overall performance of the market.
Traders can speculate on the price of rising or falling indices without holding the underlying asset through CFD. The index is a highly liquid trading market. Compared with most other markets, the trading time is longer and you can get a longer exposure to potential opportunities.
The stock indices market trend is based on the stock market price trend. Stock market price movements tend to move in a certain direction. During the period of economic growth, stock prices continue to rise, which means that the stock index tracking these stock prices will also continue to rise and show an upward trend. In the foreign exchange market, the trend of the currency market may not be obvious because the market fluctuates on the stock index.
is different from foreign exchange currencies that can consolidate for a long time and generate many false signals. Stock indexes rarely consolidate for a long time, and stock indexes will show a specific trend direction at any given time, whether it is rising or falling.
This means that there will be fewer false positives when trading stock indexes, and all traders know that fewer false positives equal better profit opportunities. Another advantage of indexes is that 1 point of stock index changes is equal to $0.1, instead of $10 in currency transactions. This means that when trading stock indexes, the average profit per 1 point is lower, so traders can implement better money management in stock indexes because the minimum price of 1 point does not change much. At the same time, since the average volatility of the stock index is 500 to 2,000 points on average, even if 1 point volatility is equal to $0.14,444, traders can still get a good profit.
Most stock indices are calculated based on the market value of the companies that comprise them. This method gives more weight to large-cap companies, which means that their performance will have a greater impact on the value of the index than small-market capitalization companies. However, some popular indices, including the Dow Jones Industrial Average (DJIA), are weighted by price. This method gives more weight to companies with higher stock prices, which means that changes in their value will have a greater impact on the current price of the index.
There are many ways to calculate the value of a stock index, but the most popular method is:
Understanding these indices is only the first step to achieving profitable trading. In addition to calculations, the most important thing about these stock indices is understanding what influences their movements
Indices can be traded using underlying cash futures or indices. Futures trade nearly 24/5, while the underlying cash index trading time depends on the broker. The table below shows the top market trading hours for the popular spot index markets provided by Scope Markets. In fact, these indices are traded outside of prime market hours, but spreads have widened due to a lack of liquidity.
INDEX | MAIN MARKET OPEN (ET) | MAIN MARKET CLOSE (ET) | MAIN MARKET OPEN (GMT) | MAIN MARKET CLOSE (GMT) |
SP500 | 9:30am | 16:00pm | 14:30pm | 21:00pm |
WS30 | A | 16:00pm | 14:30pm | 21:00pm |
NAS100 | 9:30am | 16:00pm | 14:30pm | 21:00pm |
DAX30 | 3:00am | 11:30pm | 8:00am | 16:30pm |
UK100 | 3:00am | 16:00pm | 8:00am | 20:00pm |
AUS200 | 5:00pm | 11:00am | 10:00am | 16:00pm |
JPN225 | 18:00pm | 1:30pm | 24:00pm | 6:30am |
CAC40 | 3:00am | 11:30pm | 8:00am | 16:30pm |
HSI50 | 20:15pm | 1:59am | 1:15am | 16:59pm (with breaks) |
ESP35 | 3:00am | 11:30am | 7:00am | 16:30pm |
ESX50 | 2:00am | 16:00pm | 7:00am | 21:00pm |
A market index is a hypothetical portfolio of investment stocks that represents a part of the financial market. The index value is calculated from the price of the relevant stock. Some indexes have values based on market capitalization weights, income weights, floating weights, and fundamental weights. Weighting is a method of adjusting the individual impact of items in the index.
LULAMA MSUNGWA
Research & Markets Analyst
Scope Markets
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