FXTM information and reviews
FXTM
95%
OctaFX information and reviews
OctaFX
94%
XM information and reviews
XM
93%
FXCC information and reviews
FXCC
92%
Libertex information and reviews
Libertex
91%
HFM information and reviews
HFM
89%

Advantages of Trading Indices with OBRinvest


17 June 2021

Indices are tools used to measure the performance of some group of similar assets in a measured and standard way. Most people recognize the indices that are used to measure the performance of a basket of equities. These indices are often meant to replicate the performance of a market sector. Some indices are broad-based like the S&P 500 and the Russell 2000, but others are more focused on a specific market sector or industry.

While indices are most commonly recognized in equity markets, they can also be used to measure other data such as production, inflation, and interest rates. In many cases these indices are created to serve as a benchmark to evaluate the performance of individual assets or the return in a portfolio.

Popular Indices

While there are indices for most of the markets all across the globe, some are more popular than others. It should come as no surprise that these popular indices are from some of the world’s largest economies. Below are 6 of the world’s most popular indices:

What Affects the Index’s Price?

The price of any index is based on the prices of all its individual components. So as the price of those components changes, so does the price of the index. However, there are different ways to calculate the price of the index and this will also affect the rate of change in the index’s price.

In most cases an equity index is calculated using the market capitalization of the underlying companies. Using this method will make large cap companies more important in the index and their price changes will have a greater impact on the overall index price.

Another way to calculate the value of an index is through price-weighting. The DJIA is calculated in this way and it means that companies with a higher share price get a heavier weighting in the index. In this case the changes in the higher priced equities have a greater impact on the value of the index.

Advantages of Trading Indices

Trading in indices can have some distinct advantages over trading in individual equities. Because an index is a basket of securities, its price movements are typically smoother and can be easier to predict. Clear patterns often emerge on the charts when trading in indices. Another benefit of the diversification in an index is that it makes them one of the least likely asset classes to suffer from manipulation. There are simply too many assets included in the index for anyone to manipulate the price.

Because the index is made up of so many different assets, they also feature diversification and money management built right in. And since indices have a smoother movement and less volatility than individual assets, they present less risk to traders.

The difference between ‘cash indices’ and ‘index futures’

Cash indices are the actual real-time value of the index and are often preferred by traders with a shorter time horizon. That’s because the cash indices often have tighter spreads and greater liquidity. Many day traders will use cash indices, closing out their positions at the end of the trading session to avoid paying overnight financing charges.

Index futures are contracts that are priced based on the future expectations of the market regarding the price of the underlying index. Index futures, like any futures product, have an expiration date. They also have no overnight funding charge and are typically preferred by traders with a longer time horizon who plan on holding their positions for a long period of time.

#source

Share: Tweet this or Share on Facebook


Related

Copy Trading With Vantage: Helping Traders Trade Market Opportunities
Copy Trading With Vantage: Helping Traders Trade Market Opportunities

Ever wondered if there’s more to trading? Social Trading allows any trader to entirely mirror the trades of other seasoned traders in the market with a reputable track record...

1 Dec 2022

OctaFX broker invites everyone on a festive trading journey
OctaFX broker invites everyone on a festive trading journey

This winter, the global Forex broker OctaFX invites every trader on a four-week trading journey aboard its Festive Express. A massive New Year campaign will appeal to all who love lucrative offers. It is the perfect opportunity to start celebrating the coming year...

29 Nov 2022

ActivTrades: Infinitely scalable investing solutions
ActivTrades: Infinitely scalable investing solutions

Innovative and robust investment technology by industry leader for the most demanding institutional partners. We serve a wide range of organisations delivering first-class investment and brokerage solutions...

24 Nov 2022

Join Libertex for a chance to win 500 BTC
Join Libertex for a chance to win 500 BTC

November marks a momentous month for the Libertex Group as the veteran broker gears up to commemorate its 25th anniversary. After surviving and thriving a full quarter century...

24 Nov 2022

AMarkets increases the leverage for cryptocurrency pairs
AMarkets increases the leverage for cryptocurrency pairs

AMarkets has increased the leverage to 1:100 for BTC/USD and BTC/EUR pairs, and to 1:10 for other cryptocurrency pairs. There are now 27 cryptocurrency pairs...

23 Nov 2022

Olymp Trade’s 8th birthday event results
Olymp Trade’s 8th birthday event results

Our celebration for Olymp Trade’s eighth birthday turned out to be one of the most spectacular events of the year. We held a series of online and offline events, all connected by the theme of freedom...

21 Nov 2022


Editors' Picks

FXCM information and reviews
FXCM
87%
ActivTrades information and reviews
ActivTrades
86%
RoboForex information and reviews
RoboForex
85%
MultiBank Group information and reviews
MultiBank Group
84%
FxPro information and reviews
FxPro
83%
Vantage information and reviews
Vantage
83%

© 2006-2022 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.