Indices Trading

Indices are baskets of individual stocks which belong to the same economy sector. Traders and investors invest their capital in price movements of stock indices like DAX, CAC, FTSE, Nasdaq. Price movements of Indices are dependent on many factors like political stability, factors which influence companies from inside, economic data like big shifts in the currencies market, dropping employment rates and more.

Keep in mind that price shifts in the value of a single big company is able to impact the overall performance of the index. Global index markets are dominated by Indices benchmarks. They are the largest indices, impact the economic health and serve as performance indicators.

Updated table of Indices Prices

The most famous and powerful Indices include:

The FTSE 100 – It is compounded by the UK 100 biggest companies by market capitalization.

The DAX – It is compounded by the 30 major German companies, referred as ‘Germany 30’.

NASDAQ 100 – It is a capitalization-weighted index, compounded by more than 100 tech companies in the US.

Dow Jones – It is called differently ‘Wall Street’ and comprises 30 of the US’ biggest companies.

Nikkei 225 – It is compounded by 225 biggest Japan companies.

CAC 40 – It is referred to as the France 40, and it comprises 40 of France’s biggest companies by capitalization.

Online Trading Keywords

Leverage

Leverage is the core of trading, you are borrowing extra power to trade. You place a small percentage of the total amount and the leverage will multiply it. Leverage depends on the type of instruments you are trading.

Margin

Margin is known as the amount of investment needed to fund your account, so it is eligible to open any position you wish. If you want to buy 0.1 lots of EUR/USD at 1.13410, with 1:30 leverage. Margins = (1.13410*10,000)/30=$378.3.

Slippage

There are two excellent risk management tools, stop loss and take profits. Combine it with correct position sizing, account sizing and market volatility. If the market should be trading at a different level from the stop-loss level at that precise moment of execution then the stop may be filled at a better or worse price. This is known as slippage.

Spread

Spread is the cost of trading, and it is calculated as a difference between the bid and ask price. Risk management and correct positions are considered core components of any trading experience, the primary goal is to grow capital by buying low and selling high.

Pip

Pip measures the price change that will decide profits and loss. On a 5 decimal place currency pair a pip is 0.00010; on a 3 decimal place currency pair a pip is 0.010; on a 2 decimal place currency pair a pip is 0.10.

Swap

The first cost of a trade is the spread. The second one is the swap. The swap is the interest adjustment calculated over the account each day at 00:00, server time.

Long & Short

To go long is to buy, or to believe that the price will be appreciated in the future, so you buy now, at a lower price. To go short is to sell, or to believe that the price will be depreciated, so you sell the asset to cut the losses.

Technical and fundamental

Technical analysis involves the use of charts to better understand market behaviour and ascertain probability as well as the risk-to-reward trade-off. Fundamental analysis involves the interpretation of news flow and how new information can affect the pricing of markets.