S&P/ASX 200 Index
The ASX 200 stock index tracks the top companies in the Australian Stock Exchange market. The total number of stocks used to calculate this index is the 200 top Australian companies represented in the ASX 200. This index is calculated based on capitalization of the included companies and it is reviewed quarterly.
Even though this index is calculated based on capitalization, it does not track capitalization; it tracks the change in the stock prices of the various component stocks in this index.
The ASX 200 Index Chart
The ASX 200 Index chart is shown above. On the example above this financial instrument is named as AUS200CASH. As a trader you want to find a broker that provides this The ASX 200 Index chart so that you can start to trade it. The stock index example above is of ASX 200 Index on the MetaTrader 4 Forex and Stock Indices Trading Platform.
Other Information about ASX 200 Index
Official Symbol – AS51:IND
The 200 component stocks that make up the ASX 200 Index are picked from the top Australian companies measured by capitalization. This index has a base up on which the calculated total market capitalization is adjusted relative to this base – the calculation also has a divisor that means that this stock index will only reflect a change in movement only when the share prices move up and not when the market capitalization does, therefore, this index show the difference in the share prices rather than the total market capitalization. This is because the base represents the starts value of all share prices and when this index is calculated it tracks the total change in the share prices.
Strategy for Trading ASX 200 Index
The ASX 200 Index will generally move up because share prices always move up over time. This index generally moves up over the long term because the Australian economy also shows strong growth backed by their mining sector which has great reserves of Gold and other valuable commodities.
As a trader wanting to trade this stock index, the stock index will move upwards faster when the Australian economic indicators show accelerated economic growth.
As a trader you want to be biased and keep buying as the index moves up. When the Australian 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 - AUD 70
Value per 1 Pip - AUD 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.