With the increasing importance of the stock market, the names of global market indices such as the DJ, S&P 500, FTSE100 or DAX 30 have become a part of the world of economics.
What is the definition of global market indices? The stock market index measures the level of prices in the market, as it is based on a sample of enterprise shares that are traded in regulated or unregulated capital markets, or both. In a simpler definition: A stock index is a basket of stocks. The price of a stock index is a simple or weighted average of the stocks that make up the index. There are two types of indicators: indicators that measure the market condition in general, such as the Dow Jones Industry Average (DJIA) and the Standard & Poor’s (S&P 500) 500 Index, and there are sectoral indicators, meaning that they measure the market condition for a specific sector or industry, such as, for example, the Dow Jones Industrial Average. Transportation, or the Standard & Poor’s Public Service Industry Index.
What is the relationship of indicators to the economic situation? As long as the activity of the establishments whose securities are traded in the capital market represents the largest part of the economic activity in the country, and if the capital market is characterized by a degree of efficiency, the index will in this case be a mirror of the general economic situation of the country. In addition, stock price indices can predict the future economic situation before any change occurs before a period of time.
There are characteristics given to stock markets. When the expected movement of the stock price index is heading upward, then the stock market is called the bull market (but when the expected movement of the index is heading downward
Global market indices and their most important uses for investors
Stock market indices have many uses of interest to individual investors and other parties dealing in capital markets.:
1- Giving a quick idea about the performance of the financial portfolio, as the investor can make a comparison between the change in the return of his securities portfolio – positive or negative – with the change that occurred in the market index as it reflects a well-diversified portfolio, without the need to follow the performance of each security individually. Sharpness. If his investments are in a specific industry and that industry has its own index, then it would be better for him to follow that index.
2- Predicting the state of the market. If the analyst can know the nature of the relationship between some economic variables and the variables that occur in the indicators (what is known as fundamental analysis), he may be able to predict in advance what the state of the market will be like in the future.
What makes trading indicators desirable? Investors often prefer trading indices compared to trading individual stocks. The most obvious benefit is diversification, which most financial advisors recommend as a risk management strategy. You can learn about leverage and margin.
For example; The level of risk is lower when you diversify your investment between different companies, while your entire investment is exposed to a high degree of risk if you invest in one company. As Warren Buffett said, “Don’t put all your eggs in one basket.”
Another benefit is the ability to trade around the clock, especially if you invest in indices from different locations. Also, if something happens in a time zone, that event will likely affect the next market opening.
Global market indices and long-term index trading
The advantage of this strategy is that you do not need to monitor trades all time. But it should be done with minimal leverage or even no leverage. Because in financial markets, when you stay in the market for a long time, the risks are higher and you should pay attention to the leverage effect. Although leverage will help you increase gains, at the same time it will increase losses.
Why trade CFDs? CFDs are a type of betting investment, but are preferred by most investors:
There are no exchange fees because you do not own the index and do not acquire any rights or obligations in relation to financial instrument. You can benefit from rapid price fluctuations and move freely between more than one financial asset without purchasing it physically
What are the leading global market indicators?
United States of America:
Dow Jones: This index contains thirty securities representing 30% of the New York Stock Exchange.
Standard & Poor’s S&P 500: It contains five hundred securities representing 80% of the market value of stocks traded on the New York Stock Exchange.
England:
FT-30: This index brings together thirty of the most important securities on the London Stock Exchange.
FTSE-100: tracks the top 100 stocks trading on the London Stock Exchange. Although based in the UK, many of the index’s companies have a global focus and earn profit outside the UK, so it does not closely track the UK economy.
France:
Index: CAC40 consists of 40 securities of the most important companies on the Paris Stock Exchange.
Germany:
Index: DAX contains 30 securities representing 70% of the stock market’s capitalization.
Japan:
Nikkei Index: Contains a security that represents about 70% of the Tokyo Stock Exchange’s capitalization.
Australia:
ASX 200: tracks the top 200 stocks on Australian Stock Exchange.
Global market indicators and their most important features
How are stock market indices read? Cap indexes are used to limit the control of large companies over the index. The value of the indexes with the highest limit is calculated according to the following equation: Index value = (the sum of the market values with the maximum limit of free float shares today / the sum of the market values with the maximum limit of free float shares on the previous day) x the value of the index for the previous day)
What is the function of the indicator? An indicator is an assessment and decision-making tool (retrostruction and correction adjustments) through which we will be able to measure a situation or trend, in a relatively objective way and in a given time or space. An indicator (qualitative or quantitative) generally describes a situation, stress or response in which a decision cannot be made directly.
What is the difference between an indicator and an arrow? And what does it represent? A stock index is a measure of the value of a particular part of the stock market. For example, the FTSE 100 is a number representing the 100 largest companies traded on the London Stock Exchange. If the share price of these companies rises on average, the FTSE 100 will rise in turn.
