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How to trade stock indices?

Many people think that Forex trading is the only currency. What a surprise the beginning trader, when, having dug in МТ 4, he finds gold and silver quotations, some promotions and contracts (Futures). Some brokers offer more trade Options. You can not get confused.

Today we'll talk about the indexes that are used more in the stock market, but are closely related to Forex.

Equity indices-definition

Stock indexes (IA) are a combination of indicators, which characterize the dynamics of fluctuations in the stock prices of companies that helps make forecast about future changes in their value.

How are stock index and what does it do? Understanding how to calculate the and and and, you can correctly interpret his changes, predicting future growth or decline.

Calculation of stock indices

Allocate 4 basic ways how to calculate IA:
1. nevzvešennogo calculation of the arithmetic mean. In this way, the Dow Jones industrial average (the Dow-Jones Industrial Average).

2. calculate the weighted arithmetic mean. Using different methods of weighting: for the price of shares in the sample, the sample cost, equating weight shares in companies. In this way, the index rating agency Standard and poor's (S & P 500).

3. nevzvešennogo calculation of the geometric mean. This formula is the oldest and the UK ft-30 (FT-30 Share Index, the Financial Times Industrial Ordinary Index).

4. calculate the weighted geometric mean. Is used to determine the composite Value Line Composite Index Average (stock market of the United States).

The trader does not need to know all the details of the formulas, it is important that he understand that IA is the average value of a specified group of shares that displays the status of a particular sector of the market (for example, "blue chips" or industrial companies). In other words, we need to take all of the shares of the sector and calculate the mean value is only stocks the most notable companies. This is the representativeness (visibility) using the IA.

A real account and make different organizations, most of the information or the rating agencies, as well as the stock exchange.

The major stock indexes

In the Forex market, like the stock market, traders can buy or sell several IA. Below we take a look at the Dow Jones and S & P 500. Data and most relevant to United States securities, but allow you to quickly assess the State of the economy and Forex traders.

The Dow-Jones
For its calculation used 30 largest companies in United States stocks. Options-700 shares instead of 30 or exclusively offer transport and utility companies.

The index Standard and Poor (S & P 500)
Includes 400 industrial companies, transport 20, 40 and 40 public utilities.

Both indices are indicative for the economy of the United States. The most popular NASDAQ 100 (100 largest non-financial sector companies on the NASDAQ market, United States), DAX 30 (Germany), the FT-SE 30 Share Index, the Financial Times Industrial Ordinary Share Index (United Kingdom), Nikkei (Japan), RTS (Russia).

This diversity reflects different ways and their calculation, as well as a number of countries, which allows you to assess the market situation from different points of view.

The "perfect" that satisfies the needs of all participants in the market at the same time-there is no. The so-called family and are therefore used, i.e. and. with different equations.

The downside is the "backlog" of constantly changing market conditions. But slowly developed markets, and experts organizations ensure that display the State of the markets and accurately by adjusting the calculation formula.

Equity indices-conclusions
Does not need to be too complicated or rely on IA. Use the IA has been and continues to be relevant to the overall assessment of the circumstances of any particular market sector, but detailed forecasts are drawn up according to other criteria. Still ignore the force of IA is not worth it. Many mutual funds and private investors use indexes to invest their capital. If the stocks selected companies grow in value, the economy is growing, investors will profit. If not-you can either be purchased on more favorable price, waiting up in the future (if you believe that company are reliable and their shares will rise in price) or sell short.

Cost and schedule. is no different from any other graphics, allowing the trader to use similar signals (divergence, crossing moving averages, etc.)

In any case, those traders who use the IA in its trade, have an advantage over other players, also, the advantage of the Forex market provides a reliable broker.

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