Equity Indices | Merit Forex

Equity Indices

On Merit Forex trading platform you will be able to have access to trade Dow30, Nas100, Spx500, Dax30. Equity indices are traded by Cfd’s which is an aggrement between two parties to exchange the difference between the opening and closing price of a contract. It lets you to trade price movements without owning the underlying instrument.

One of the biggest and oldest stock exchanges is the London Stock Exchange. The most important Index is the FTSE 100 which includes the biggest 100 public companies by market capitalization. The direction of the change in price is determined very easily – if more than 51 out of the 100 companies trend higher for the day, FTSE 100 usually does the same and vice versa.

American Indices have the highest influence overall, especially the following ones:

Dow Jones, Nasdaq and S&P 500 (US)

Dow Jones – Also known as Dow30 or DJIA, this is one of the most important indices in the world because it’s composed out the 30 biggest companies by market capitalization in US for each sector. Often referred as the Industrial index. Includes companies such as General electric, Exxon mobile, Johnson & Johnson and recently Apple were added to DJIA, replacing AT&T. This happened after Apple announced they’re going into the car industry.

Nasdaq – World’s leading technological US index which includes the largest public companies listed there. NASDAQ is different from the other Indices, because it excludes all financial companies, where the influence of a very high valued stock compared to the others is limited on purpose. For example, the highest valued stock is Apple ( AAPL ) with a market capitalization of almost 900 billion dollars is a few times bigger than the other 99 companies combined. This means measures are needed which will prevent manipulation in price changes. In other words, the US government doesn’t want the fate of 99 companies to be predetermined by a single one.

S&P 500 – Standard & Poor 500 is an Index which is composed of 500 U.S companies that are the leading ones for heir sector compared by market cap. Represents all 10 sectors of the economy, because of this S&P500 is the most followed index due to its diversification and importance for an overall view of the strength of the US economy. Sometimes traders refer to the S & P 500 as the “playlist” index. For example, the 500 th company based on market cap has bad quarterly results and goes down in value it will be replaced by a competitor company from the same sector of economy which has better then expected results. So, the list of companies composing this index is not fixedmand guaranteed, unlike Dow Jones.

DAX 30 and CAC 40 (Europe – Germany and France)

The most followed major indeces in ASIA are:

Hang Seng, Nikkei and ASX (Asia-Pacific)

The value of most of Indices mentioned so far are determined using an average of how big of an influence a company has depending on its market capitalization. This calculation is called a capitalization – weighted average. Companies with higher value have a bigger influence of the index itself and companies with lower market value have a smaller influence.

Another example for this formula are the Dow Jones (USA) and Nikkei (JAPAN) which are market cap driven indices. High priced stocks have bigger influence -this means a stock trading at $100 has 10 bigger influence than a stock with $10 price.

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