Stock Indices Basics Concepts

Learning to trade the stock indices trading market is much easier for beginners when beginners start by learning the indices trading basics. This way the other stock indices trading concepts become much easier to learn because the new indices trader will have already learnt about the basic ideas before proceeding to the other indices trading concepts.

The indices basics that traders should learn first before starting indices trading are:

What's Indices?

Indices is the simultaneous buying and selling of one financial instrument for another. Indices traders buy and sell for speculation purpose and for the purpose of trying to make a profit. Traders will buy indices that they think will appreciate in value and sell indices that they think will depreciate in value.

In Indices traders buy indices instruments when they become undervalued and sell indices instruments when they become overvalued. This is the basic concept of trading indices, as a beginner if you want to become successful when trading indices you must learn to buy undervalued indices instruments & sell overvalued indices instruments. Many Indices traders miss this concept and do the exact opposite buying overvalued indices instruments because that is when these indices instruments seem to be moving up and up and they sell undervalued indices instruments because these indices instruments seem as if they will continue to move lower.

Just like in stock market successful trader buy stocks when the stock indices price is low & sell stocks when the stock indices price is high. This is the same trading concept which traders should follow when trading indices.

What's Stock Indices?

Indices trading is the simultaneous exchange of one financial instrument for another, for this reason indices is traded in symbols known as indices trading instruments.

What's a Indices Quote?

Because indices instrument is traded in symbols, the stock indices price at which these indices instruments are exchange is determined by the indices trading quote.

Stock Indices is quoted in the format of decimal places.

What's a Pip?

Stock indices is quoted in the format of decimal places. Second last decimal place represents a Pip which is the smallest movement used to calculate profit & loss in stock indices market moves.

Pip means Indices Price Interest Point: it's a one point move in the indices trading quote.

What's a Lot?

Indices is traded in units known as lots. There is also the Mini lot which is made up of fractions of the standard indices lots & the Micro indices lots which are fractions of the indices trading mini lots.

What's Indices Trading Leverage?

Because not many traders can afford to trade standard indices lots which require a lot of money to trade, there's indices trading leverage in Indices which means that traders can borrow money and use the borrowed money to make trades with. For example stock indices leverage of 100:1 means that a trader with capital of $10,000 can borrow up to 100 times using the 100:1 stock indices leverage option & therefore after borrowing using this indices trading leverage the trader will have a total of $10,000 multiplied by 100, which means the trader will have a total of $1,000,000. This stock indices leverage is what makes Indices accessible to retail indices traders because retail stock indices traders can begin with little capital of their own & use indices trading leverage to borrow the rest of the money required for trading. Money that the trader deposits is referred to as a indices trader’s margin & a trader can continue borrowing money using this stock indices leverage option as long as they have the required margin in their trading account. This is why traders must have the required account balance in their account to open the trade transactions they want to.

What's Indices Trading Margin?

Margin is the particular amount of money that a trader is required to put aside in order to continue holding an open indices trading leveraged trade. Margin can also be explained as the deposit a trader is required to keep so as to maintain his open positions. This margin is a percentage of account equity that has to be set aside and allocated as a margin deposit for the open positions that are held by a indices trader.