Today, we are going to be looking the indices (Index), to recollect from the lesson 2, I mentioned that A Market index is a benchmark of the value of a range or market of shares. An index allows you to see what the overall performance of the market is and allows comparing of an individual shares performance against the general trend of the market. Shares in different sectors. A benchmark is a standard against which something can be measured or assessed.
People actually trade the index for a living, so basically, a person would be speculating whether the particular index in question would go up or down.
To trade such Financial Market would be by means of a Derivative (This is a financial instrument that gets its value from the underlying asset.)
Types of derivatives are Options, Binary Options, contracts for difference, Futures contracts.
The above derivatives are also used to trade/speculate in currency. What I mean by speculating is that if you believe that a particular Market is going to go up, you go Long (Buy) and if you believe that it’s going to go down you go Short (sell).
Here are various indices for the main Financial Markets around the world.
Here in the UK, we have;
FTSE 100 : The Financial Times Stock Exchange 100 share index; The Footsie, as you will sometimes see it written and pronounced – is an index that measures the performance of the shares of the 100 largest companies (according to the market capitalisation) listed on the London Stock Exchange, sometimes referred to as the LSE. It measures the daily share price performance of those 100 firms.
If the FTSE 100 is up, it means there are more people buying than selling and share prices have risen. Conversely, if more people are dumping shares the index goes down.
Dow Jones Industrial Average.
Usually called the Dow, it is a weighted average of 30 important blue chips, stocks that are traded on the New York stock exchange and the NASDAQ. It has been around since 1896 and formed by Charles Dow. It is one of the oldest and most significant and followed indexes round the world.
S&P 500: The S&P 500, or the Standard & Poor’s 500, is a stock market index based on the market capitalizations of 500 leading companies publicly traded in the U.S. stock market, as determined by Standard & Poors. It differs from other U.S. stock market indices such as the Dow Jones Industrial Average and the NASDAQ the stocks in the S&P 500 represent roughly 70 percent of all the stocks that are publicly traded. “S&P” stands for “Standards and Poor’s,” the name of a market research firm.
The NASDAQ — “Nasdaq” refers to both an index and a trading exchange
This marketplace is called an “exchange.” The most famous one is the New York Stock Exchange. There’s also a famous one called the Nasdaq Exchange.
The NASDAQ market index, which is known as the “Nasdaq Composite,” tracks the roughly 3,000 companies that are traded on the NASDAQ exchange.
CAC 40: The French stock market index that tracks the 40 largest French stocks based on market capitalization on the Paris Bourse (stock exchange). The CAC 40 is used as a benchmark index for funds investing in the French stock market.
A blue chip index in Germany. It tracks the performance (dividends added in) of the 30 most actively traded stocks on the Frankfurt Stock Exchange. Prices are taken from the Xetra electronic trading system and are updated every minute.
The Nikkei index or the Nikkei Stock Average is a stock market index for the Tokyo Stock Exchange (TSE).It is a price-weighted index (the unit is yen), and the components are reviewed once a year. Currently, the Nikkei is the most widely quoted average of Japanese equities, similar to the Dow Jones Industrial Average. In fact, it was known as the “Nikkei Dow Jones Stock Average” from 1975 to 1985.
Hang Seng: The Hang Seng Index, market capitalization-weighted stock market index in Hong Kong. It is used to record and monitor daily changes of the largest companies in the Hong Kong stock market and is the main indicator of the overall market performance in Hong Kong. These 48 constituent companies represent about 60% of the capitalization of the Hong Kong Stock Exchange.
Index, indices or indexes, they are all the same thing.
Until next time – Keep Believing, Keep Hoping & Keep Loving.