Trading the stock index on Valutrades is an excellent alternative to directly trading stocks. Now you can trade a minimum of 0.01 hands, which means there is more flexibility for position planning. Instead of directly trading a single stock, you now have the ability to trade a set of assets at once through a stock index based on stock prices or corresponding market capitalization for each company.

Valutrades offers you a variety of optional stock indices

Some major stock indices in the United States, including the Dow Jones Industrial Average, the S&P 500 Index, and the Nasdaq Composite Index

FTSE 100 Index, including 100 companies listed on the London Stock Exchange

Major European indices such as the Euronext 100 Index, CAC40 Index, and Swiss Market Index

Major Asian indices such as the Shanghai Stock Exchange Composite Index, Nikkei 225 Index, and Taiwan Stock Exchange Weighted Index

Australian S&P/ASX 200 Index

Trading Stock Index 101: What are stock indices and how do they work?

Stock indices, such as the Dow Jones Industrial Average or Nasdaq Composite Index, use a standardized method to monitor the overall performance of a range of assets. This performance is widely regarded as an indication of the overall direction of a specific part of the market. Then, these indices are used as standard benchmarks to help evaluate the performance of a particular investment.

For example, the Dow Jones Industrial Average includes 30 major companies on stock exchanges across the United States, such as Apple, McDonald's, Visa, Coca Cola, Johnson&Johnson, Microsoft, and others. However, more concentrated indices may only track a specific industry or market segment.

Each stock index has its own specific characteristics and may be greatly influenced by various factors, such as economic events, currency pressures, trade wars, supply shortages, national or global politics, natural disasters, and economic sentiment.

What is stock index trading?

Stock index trading refers to the purchase and sale of stock market indices. Because indices technically represent the overall market performance of a group of stocks, index trading is a passive and simple way for participants to enter the financial market without directly purchasing stocks from an institution.

What are the benefits of trading stock indices?

Because you are trading a variety of stocks, index trading is considered less risky than selling or purchasing individual stocks of a company directly. When the value of stocks included in an index increases, the value of the index also increases. However, if the value decreases, the value of the index will also decrease.

The index provides traders with a direct method of assessing the health of the market. This assessment enables participants to determine the current state of the market and understand the market's response to past events, which can help them make better decisions and predictions.

How are the main stock indices calculated?

The stock index is calculated using two different methods: indirect and direct. Each method considers several different factors, but a major comparison between these two concepts is related to the weight of each relevant stock included in the index.

When directly calculating a stock index, the prices of each stock included in the index are added together. For this method, the value of each stock is the same, and no stock is considered more valuable than another stock.

However, when using more common indirect methods to calculate stocks, the average price of the relevant stocks in an index is multiplied by the average trading volume of each stock. Then merge these numbers to determine the transaction volume weighted price. When indirectly calculating an index, the value of related stocks is different, and some are considered more valuable than other stocks.

What is the most popular stock index?

There are three main types of indices: global, regional, and national. The global index monitors stocks around the world. The MSCI World Index tracks mid to large cap stocks in 23 countries, measuring market performance in specific regions.

In addition to the MSCI index, the FTSE Global Index, Dow Jones Global Titan 50 Index, S&P Global 100 Index, and S&P Global 1200 Index are some of the most popular and highly traded indices.

Regional stock markets include the S&P Asia 50 Index, the S&P Europe 350 Index, and the S&P Latin America 40 Index. The national index includes China's Shenzhen Composite Index and Germany's TecDAX Index.

There are approximately 5000 indices in the United States, with the three most popular being the Dow Jones Industrial Average, Nasdaq Composite Index, and S&P 500 Index. In Europe, the FTSE 100, DAX 30, and CAC 40 are the most popular.

What drives stock index prices?

The stock index may be influenced by a series of events or factors, from political events to internal transformations within a specific index organization. Let's take a look at the situation that can affect index prices:

A constantly changing, changing, or unpredictable economic environment: inflation, high unemployment, consumer spending, income events, etc., can all drive the index up or down. For example, the Dow Jones Industrial Average fell by over 800 points in early June 2022 after a sharp rise in national prices and low consumer sentiment.

The internal changes of companies included in the index include policy changes, recruitment measures, large-scale layoffs, and other events that occur within the company, all of which can affect its stocks. For example, Netflix lost over 200000 users in the first quarter of 2022, and its value also declined accordingly. This sharp decline subsequently led to a decline in the Nasdaq index.

Market sentiment: Market sentiment describes investors' feelings towards a specific financial market or securities. Market sentiment can be observed through price fluctuations and market activity. The most popular market sentiment index is called the CBOE Volatility Index, which measures the price changes and volatility of the S&P 500 index over a 30 day period.

Political events such as wars, peace treaties, tariffs, trade agreements, etc. can all affect the index. For example, when Russia invaded neighboring Ukraine in February 2022, the S&P 500 index fell in the following weeks. However, about a month later, the financial market rebounded and oil costs soared to over $100 per barrel.

Using technical analysis to improve stock index trading.

Technical analysis can play an important role in helping traders make the right decisions.

Foreign exchange traders use various tools to help identify breakout and support lines, as well as ideal entry and exit points. There are hundreds of technical analysis indicators on different trading platforms, each with its own advantages and disadvantages. We currently offer seven different custom metrics for our MetaTrader 4 platform, which can help you discover settings and become a smarter trader.