If you want to be a trader, then there are plenty of things that you must understand beforehand. We will continue to educate you in this article in order to make you a better trader. Today we will talk about trading indices – what it is and how to cook it correctly. Make yourself comfortable and enjoy reading.
If the information provided is not enough for you, we will tell you where to find more! If you are too lazy to read, just follow the link. So, let’s begin.
Complex Things Simply Put
Trading indices (also called stock indices) are indicators of the state of the stock market. A basket of the foremost liquid common stocks and bonds is used to calculate it. Indicators facilitate the determination of the present economic cycle, and state of the exchange. Simply put, this index measures the common amendment in the price of a specific group of securities.
Investors use these indices to assess current situation on the markets and to predict the results of future trading operations. Indicators are calculated for various countries, industries or for a precise group of securities – bonds, stocks, different assets.
These indices are divided into two most common groups according to the calculation method:
- Simple arithmetic means. This is when the prices of the shares included in the index are added up and divided by their own number. This is how the Dow Jones indexes are calculated.
- Weighted average – as a rule, by capitalization. With this calculation method, it is possible to weigh not only the prices of the shares themselves, but also their number (and, accordingly, their influence) in the market.
By geography, such indices can be:
- International – for example MSCI World (includes 6000 global companies) and S&P Global 100 (respectively, includes 100 largest companies in the world)
- National – for example Dow Jones Industrial Average, used on the New York Stock Exchange, FTSE 100, which calculates the index based on the 100 largest companies on the London Stock Exchange, and so on.
You can also invest in a stock index. To do this, for example, you can buy all the securities included in the index. Or by investing in investment funds, such as ETFs (Exchange Traded Funds), the portfolio of which repeats the composition of the corresponding stock index.
What should I do with this information?
Informed means armed. If you want to become a trader, such knowledge will be extremely helpful and you cannot do without it. Understanding stock indices will allow you to predict the behavior of the market and the feasibility of purchasing certain securities.
For more detailed information, you can go to FBS.com in the analytics section. There you can find more valuable information on a huge number of different topics. FBS is not only a database, but also your reliable broker. You will be able to trade Forex, Stock Indices, Stocks and Metals.
Benefits of using FBS:
- Cent account – the risks are 100 times lower.
- 1:3000 leverage – the highest one on the market.
- Low Spread – starting from 1 pip.
- Easy payment processing.
Study user reviews – this will allow you to make a more informed decision. We also highly recommend that you familiarize yourself with other useful data provided on the site – this will allow you to become an even better trader! We, in turn, wish you good luck and huge profits.
However, you should not forget that you risk losing all investments without prior preparation. You can use a demo account, a cent account and a huge database, full access to which is open to absolutely everyone. You don’t even have to register for this. All you need to do is spend some time and look around. Then you can decide whether to trust this broker. But be sure – we do not recommend to our readers what we would not use ourselves.
