During any given trading day, the stock prices of certain companies will rise or fall. Since a stock index is a collection of a basket of underlying stocks, its actual price will move up or down based on the overall dynamics (mathematical and statistical formula) that each stock price contributes to its final price.
Some useful points to understand when trading stock indices:
1. All stocks in a specific stock index (such as the DAX) undergo a selection process and may be replaced by another company if its overall trading performance is beaten by a new entrant. This means that listed companies are constantly changing according to their performance.
2. Determining the impact of a particular stock on the overall stock index involves calculations and rules. Not all stocks that add to the basket are treated equal. For example, the total price of a stock index is not simply adding the stock prices and dividing them by the number of shares.
3. The stock index shows the general consensus and can be considered a benchmark for the performance of the stock market in general.
The main difference between spot prices and futures prices is that spot prices are for immediate buying and selling, while futures contracts delay payment and delivery to predetermined future dates.
Step 1 Register
Step 2 Fund
EURUSD1.2184 1.2186
GBPUSD1.4167 1.4169
USDJPY109.35 109.38
USDCAD1.2101 1.2103
Step 3 Trade