Indices (or Indexes) are weighted sum of local stocks.
The Dow Jones is the indices for the 30 largest US companies.
Nasdaq (National Association of Securities Dealers Automated Quotations) is the indices for the tech stocks.
FTSE (pronounced Footsie) is the indices for UK stocks
Most countries have 1 or multiple indices for their stocks.
Indices are derivatives - meaning they're traded via contracts (CFDs, options, futures, ...) based on an underlying financial asset (or set of assets).
Derivatives are used by traders to speculate on the future price movements of an underlying asset, without having to purchase the actual asset itself, in the hope of booking a profit
Less volatile than underlying stocks
When trading equity, any news may bring very high volatility at least in the short-term.
Think of when Elon Musk tweeted that the "TSLA stock is too high" or when he told the SEC to "go f*ck themselves".
No wonder why the stock dropped by 2 digits percent short-term
Indices are sensitive though to macro-events such as recession, inflation, US elections, coronavirus, ...
That's being said, it's unlikely that the US indices could go up or down too much in a day.
CME Group U.S. equity index price limits (and corresponding CME and CBOT rules) are designed to coordinate with circuit breakers provisions as applied by the New York Stock Exchange (NYSE).
- 7%, 13%, and 20% price limits are applied to the futures fixing price and are effective from 8:30 a.m. CT – 2:25 p.m. CT. Mondays through Fridays. From 2:25 p.m. to 3:00 p.m. CT, only the 20% price limit will be applied to the futures price-fixing.
- 5% up-and-down limits are effective 5:00 p.m. - 8:30 a.m. CT. Sundays through Fridays; and 3:00 p.m. - 4:00 p.m. CT, Mondays through Fridays. Between 3:00 p.m. - 4:00 p.m. the 5% price limit will not be allowed to breach the 20% daily limit.
- The fixing price is the volume-weighted average price, VWAP, calculated during the 30 seconds of trading from 2:59:30 p.m. – 3:00:00 p.m. CT
Equity indices are subject to news but to a much lesser extent compared to the individual stocks used to build those indices.
Advantageous Trading Hours
US stocks quote Monday to Friday from 9:30 EST to 4:30 EST.
However, the US indices quote Monday to Friday 23 out of 24h.
Myself as a European, I'm trading the US indices from the EU morning here.
Even if the underlying equities aren't quoting yet, the indices can be traded.
There are often superb trades outside the US Cash stocks trading hours.
This is an uncommon knowledge as most supposed that indices aren't volatile when the underlying stocks aren't quoting - nothing could be further from the truth.
There is serious money to be made when our US friends are still sleeping and even after the US Cash close (4:30 pm EST)
Indices are easier to trade
Inherent to a lower swing volatility, they're easier to trade. Intraday Indices volatility has been my bread and butter for years now.
This asset class can be traded with mostly (95%+) technical analysis and unlike cryptocurrencies trading, we don't need to double check every 5 min what's going on with twitter, news, telegram, discord, and constantly checking if your crypto gurus will exit scam on you guys
Best Trading Indicator Algorithm Builder Indices is compatible with cryptocurrencies indices from FTX and Binance such as:
Those derivatives share similar caracteristics with equity indices. As such, they're working great with our script by design.
As a beginner or as someone not performing well with trading, we strongly recommend with Indices.
Less sensitive to news and rumors hence more predictable.
We're known Indexes trading experts who've been trading this asset class for 10+ years.
Most of our trading income is coming from indices - mostly because they're easier to master than any other asset class.
Less news means we're less disturbed by some useless noise - that often lead to poor trading decisions.
From our perspective, if you love trading and even more profit, you'll go with indices first and foremost. Despite what your crypto twitter gurus are telling you everyday.
A quick note
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