FXTM information and reviews
FXTM
93%
OctaFX information and reviews
OctaFX
92%
XM information and reviews
XM
91%
FXCC information and reviews
FXCC
90%
Libertex information and reviews
Libertex
89%
FxPro information and reviews
FxPro
88%

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:


Related

Get access to 2000+ trading instruments with Demaxis
Get access to 2000+ trading instruments with Demaxis

Demaxis results-driven team of experts goes the extra mile to create more trading opportunities and build distinctive value for our clients. We’re committed to putting our clients first...

27 May 2022

Navigating the new normal with Libertex
Navigating the new normal with Libertex

If the post-pandemic age has been defined by anything, it has to be the massive surge in activity across the financial markets. The numbers of ordinary people getting...

26 May 2022

New interface and features of the Trading Instruments section
New interface and features of the Trading Instruments section

AMarkets is pleased to announce that the "Trading Instruments" section has become even more convenient. Use the search bar to look up the instruments you are interested in and view detailed...

26 May 2022

MultiBank Group reveals new crypto brand, MultiBank.io
MultiBank Group reveals new crypto brand, MultiBank.io

MultiBank.io underlines blockchain ambitions with champion golfer Danny Willett sponsorship ahead of new digital assets offering. The MultiBank Group, one of the world's leading online...

25 May 2022

Olymp Trade's New Trading Signals
Olymp Trade's New Trading Signals

Trading Signals are instrument-specific real-time trading advice available on Fixed Time Trades (FTT) and Forex trades (FX) trading modes of the Olymp Trade platform. Read the article to see how Olymp Trade...

25 May 2022

OctaFX wins Best Mobile Trading Platform 2022 award
OctaFX wins Best Mobile Trading Platform 2022 award

OctaFX's mobile trading platform was recognised as the best of its kind by public voting held by fxdailyinfo.com as part of its Forex Brokers Awards 2022...

24 May 2022


Editors' Picks

HFM information and reviews
HFM
87%
IronFX information and reviews
IronFX
86%
FXCM information and reviews
FXCM
85%
Pepperstone information and reviews
Pepperstone
84%
NordFX information and reviews
NordFX
83%
LegacyFX information and reviews
LegacyFX
82%

© 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.