S & P 500 Index – Standard and Poor's 500 Index
The Standard and Poor's 500 Index is a stock index that tracks the capitalization of 500 stocks that represent major industries in the American economy. The list of 500 companies is made up of stocks listed in the NYSE and NASDAQ.
The S&P 500 just like the Dow Jones Industrial Average Index is more volatile than most of the other Top Indices, The S&P 500 index will over the long term trend upwards but it will have more price pullbacks and more consolidations than other stock index. Traders may prefer to trade other indices other than this one if they are more accustomed to trading the more stellar trends found in other top indices.
One of the reason this index has more oscillations than other indices is because it has more constituent stocks than other indices. This index also has a weighting factor in its calculation which also contributes to making it more volatile.
The S and P 500 Index Chart
The S&P 500 Index chart is shown above. On the example above this instrument is named as US500CASH. As a trader you want to find a broker that provides this The S&P 500 Index chart so that you can start to trade it. The stock index example above is of S&P 500 Index on the MetaTrader 4 Forex and Stock Indices Trading Platform.
Other Information about S and P 500 Index
Official Symbol - SPX:IND
The 500 component stocks that make up the S&P 500 Index are selected from the major industries in the American economy. The calculation of this index is however different compared to other Indices; the price component of the 500 stocks also has a weighting factor that makes this index more volatile than others.
Strategy for Trading S and P 500 Index
The S&P 500 Index method of calculation makes it more volatile hence there are more wide swings in the price movements of this index. Although this index generally moves up over the long term because the American economy also shows strong growth and is also the biggest economy in the world.
As a trader wanting to trade this index, be prepared for wider price swing and a little more volatility.
As a trader you want to be biased and keep buying as the index moves up. When the USA economy is doing well (most of the times it is doing well) this upward trend is more likely to be ruling. A good stock index trading strategy would be to buy the dips.
During Economic Slow Down and Recession
During economic slowdown and recession times, companies start to report lower profits and lower business growth prospects. It is due to this reason that investors start to sell stocks of companies reporting lower profits and therefore the stock index tracking these particular stocks will also start to move downwards.
Therefore, during these times stock index trends are likely to be heading downwards and as a trader you should also adjust your trading strategy accordingly to fit the prevailing downward trends of the stock market index that you are trading.
Contracts and Specifications
Margin Required Per 1 Lot - $ 12
Value per 1 Pip - $ 0.1
Note: Even though the general trend is generally upwards, as a trader you have to factor in the daily market volatility, on some days the stock index may oscillate or even retrace, the stock index market retracement may also be significant at times and therefore as a trader you need to time your entry precisely using this strategy: Stock indices trading strategy and at the same time use proper money management rules just in case of more unexpected volatility in the market trend. About money management rules in stock index trading topics: What is stock index money management and stock index money management methods.