Trading stock indexes in Valutrades is a great alternative to trading stocks directly, you can now trade as little as 0.01 lots, which means more flexibility for your position planning. Instead of directly trading individual stocks, you now have the ability to trade a group of assets all at once through a stock index that is based on the stock price or the market capitalization of each company.

Valutrades offers you a variety of stock indexes to choose from

Some of the major stock indexes in the United States include the Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite

The FTSE 100 index, which includes 100 companies listed on the London Stock Exchange

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

Major indices in Asia, such as the Shanghai Stock Exchange Composite Index, the Nikkei 225 and the TAIEX

Australia's S&P/ASX 200 index

Trading Stock Indexes 101: What are stock indexes and How do they work?

Stock indexes, such as the Dow Jones Industrial Average or Nasdaq Composite, use a standardized method to monitor the overall performance of a range of assets. This performance is generally considered to be an indication of the overall direction of a particular segment of the market. These indices are then used as standard benchmarks that can help assess the performance of a given investment.

For example, the Dow Jones Industrial Average includes 30 major businesses from stock exchanges across the United States, such as Apple, McDonald's, Visa, Coca-Cola, Johnson & Johnson, Microsoft, and others. However, a more focused index may just track a specific industry or market segment.

Each stock index has its own specific characteristics and can be greatly affected 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 an index technically represents the overall market performance of a group of stocks, index trading is a passive, simple way for participants to access financial markets without directly buying shares of an institution.

The Benefits of trading stock indexes?

Because you are trading a wide variety of stocks, index trading is considered somewhat less risky than outright selling or buying individual shares of a business. When the value of the stocks included in an index rises, so does the value of the index. However, if the value goes down, so does the value of the index.

Indices provide traders with a straightforward way to assess the health of the market. This assessment allows participants to determine the current state of the market, as well as understand how the market has reacted to past events, which can help them make better decisions and forecasts.

How are the major stock indexes calculated?

Stock indices are calculated using two different methods: indirect and direct. Each method takes into account several different factors, but one major contrast between the two concepts has to do with the weight of each related stock included in the index.

In the direct calculation of a stock index, the prices of each stock included in the index are added together. For this method, each stock is valued the same, and no stock is considered more valuable than another.

However, when using the more common indirect method of calculating stocks, the average price of the relevant stocks of an index is multiplied by the average trading volume of each stock. These numbers are then combined to determine the volume-weighted price. When calculating an index indirectly, the value of the underlying stocks is not the same, and some are considered more valuable than others.

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, which tracks mid-cap to large-cap stocks in 23 countries, measures market performance in specific regions.

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

Regional equity markets include the S&P Asia 50 Index, S&P Europe 350 Index and S&P Latin America 40 Index. National indices include China's Shenzhen Component Index and Germany's TecDAX index.

There are about 5,000 indexes in the United States, of which the three most popular are the Dow Jones Industrial Average, the Nasdaq Composite Index, and the S&P 500 Index. In Europe, the FTSE 100, DAX 30 and CAC 40 are the most popular.

What drives stock index prices?

Stock indexes can be influenced by a range of events or factors, from political events to internal shifts within organizations within a particular index. Let's look at the situations that can affect index prices:

A changing, shifting, or unpredictable economic environment: inflation, high unemployment, consumer spending, earnings events, etc., can drive an index up or down. For example, the Dow Jones Industrial Average fell more than 800 points in early June 2022 amid sharply rising prices and low consumer sentiment across the country.

Internal changes in the companies included in the index: Policy changes, hiring initiatives, mass layoffs, and other events occurring within a company can affect its stock. Netflix, for example, lost more than 200,000 subscribers in the first quarter of 2022, and its value declined with it. That sharp decline then led to a decline in the Nasdaq.

Market sentiment: Market sentiment describes how investors feel about a particular financial market or security. Market sentiment can be observed through price movements and market activity. The most popular index of market sentiment is called the CBOE Volatility Index, which measures the price movement and volatility of the S&P 500 over a 30-day period.

Political events: wars, peace treaties, tariffs, trade agreements, etc., all affect the index. For example, when Russia invaded neighboring Ukraine in February 2022, the S&P 500 fell in the following weeks. About a month later, however, financial markets rebounded and the cost of oil soared above $100 a barrel.

Improve stock index trading with technical analysis.

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

Forex traders use a variety of tools to help identify breakout and support lines and 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 indicators for our MetaTrader 4 platform, which can help you discover the Settings and become a more informed trader.