Is there a difference between stock market and Forex market?
Before I get into the U.S markets, I thought I should start by answering the question above. Yes, there is a difference between those two.
What is stock index trading?
Stock index trading is when you are trading a basket of stocks which makes up an Index. You can do that on your Forex trading platform and do it through an instrument.
Advantages of trading stock indices
- Stock indices have generally higher returns than the stock market they represent.
- The Volatility is reduced as compared to currencies.
- Stock index trading requires less research as opposed to trading /investing in individual stocks.
- When trading a stock index e.g. Nasdaq, you do not have to spend weeks analyzing all the companies under this umbrella but all you can do is just follow the instrument as you would do analyzing your currencies.
- Stock index trading does not require any traditional stock brokerage where you pay high fees, you can buy and sell on the same Forex trading platform as you would do with your currencies and it is cheaper.
There are different markets that one can focus on. In this post I will only focus on U.S markets and share a few stock Indices that you can choose from. I will do other markets as well in a different post.
U.S markets
1.Nasdaq
Sector: Technology. Nasdaq stands for National Association of Securities Dealers Automated Quotation. Nasdaq comprises of 100 companies listed on the stock exchange in the United States. This is one of the popular one’s amongst traders.
2. Dow Jones
Sector: Industrial. Dow Jones also known as the DOW, is the stock index that measures the stock performance of 30 large companies listed on the stock market in the United States.
3. S&P 500
Sector: Financial. The S&P 500 index measures the stock performances of 500 large companies that are listed on the stock exchange in the United States. The S&P market cap is 70 to 80% of the total US stock market capitalisation. It is a commonly used benchmark for stock portfolio performance in America and abroad.
What economic indicators affect these 3 Indices
The method of trading that I personally use, focuses more on fundamental analysis. Fundamental analysis is all about understanding the reasons why certain things happen in the markets. Economic data releases such as Consumer Price Index (CPI), employment data, GDP, trade wars and the Interest Rates are some of the key indicators in trading these indices. I cannot share these in detail over a blog post but I hope you have learned a thing or two about stock Indices. Thank you so much for stopping by and reading this post. kindly share with anyone who maybe in need of this content. Your shares are always appreciated.
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