IHOFX | Index Trading

Index Trading

A list of publicly traded companies and their stock values is used as an index to evaluate the performance of the group of assets. Index trading refers to the buying and selling of a certain stock market index. In order to decide whether to purchase or sell, investors will speculatively determine whether the price of an index will rise or decline. You will not be purchasing any actual underlying stock when you purchase an index because it represents the performance of a collection of stocks; rather, you will be purchasing the average performance of the group of stocks. The value of an index rises when the share prices of the companies that make up the index do as well. In contrast, if the price drops, the index's value will decrease.

Trading Indices with IHOFX

Trading indices with IHOFX gives you the unique opportunity to gain exposure to a whole economy or industry in just one position. With greater liquidity than most markets and extended trading hours, you can benefit from more trading opportunities.

At IHOFX, you get exclusive advantages such as:

  • Access to our unique deep liquidity, to ensure your larger trades are accepted.
  • Take advantage of both long and short positions - so you can capitalize on markets rising and falling.
  • Gain access to unique trading opportunities.

Open a trading account today to take advantage of all the benefits of trading indices with IHOFX.


Understanding Market Indices

A market index estimates the value of a portfolio of stocks with certain market characteristics. Each index has its own methodology which is calculated and maintained by the index provider. Market capitalization or price will often be used to weight index algorithms.

Market indices are used by a wide range of investors to manage their investment portfolios and keep up with the financial markets. Indexes have a stronghold in the investment management industry, where managers use them as the foundation for investable index funds and funds use them as benchmarks for performance comparisons.

The method used to determine the value of each individual index varies. As values are obtained from a weighted average calculation of the value of the entire portfolio, weighted average mathematics serves as the primary foundation for index calculations.


Most Well-Known Traded Indices

  • DJIA (Wall Street) – measures the value of the 30 largest blue-chip stocks in the US.
  • DAX (Germany 40) – tracks the performance of the 40 largest companies.
  • US Tech 100 – reports the market value of the 100 largest non-financial companies in the US.
  • FTSE 100 – measures the performance of 100 blue-chip companies in the United Kingdom.
  • S&P 500 (US 500) – tracks the value of 500 large-cap companies in the US.
  • ASX All Ordinaries (XAO) – tracks the 500 largest companies according to their market capitalization from Australia.
  • Shanghai SE Composite Index (SSE) – all companies traded in Shanghai.
  • Hang Seng (HIS) – a free float-adjusted market-capitalization-weighted stock-market index in Hong Kong.
  • Nikkei 225 – measures the performance of 225 large, publicly owned companies in Japan from a wide array of industry sectors.
  • Taiwan TSEC 50 Index – measures the top 50 companies by total market capitalization in Taiwan.


Factors that Influence an Index’s Price

The price of an index can be significantly affected by a wide range of factors. From economic news to company announcements, changes to the index's composition, or even commodity prices, all of these elements can have a significant impact on an index's price.

Economic news such as investor sentiment, central bank announcements, and payroll reports can cause underlying volatility, leading to shifts in the index's price. Company financial results can also cause share prices to rise or fall, and modifications to company leadership or possible mergers can have either a positive or negative effect on the index's price.

Weighted indices, which are calculated based on the relative size and importance of each of its components, can see their prices change when companies are added or removed. Lastly, various commodities can have a direct effect on different indices' prices. By taking into account all of these factors, investors can better understand the movements in an index's price and make more informed decisions.