Stock Indexes Basics Concepts
Learning to trade the stock indexes trading market is much easier for indices trading beginners when beginners start by learning the indices trading basics. This way the other stock indexes 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 trading basics that traders should learn first before starting indices trading are:
What is 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. Indices 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 and 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 indexes price is low and sell stocks when the stock indexes price is high. This is the same trading concept that traders should follow when trading indices.
What is Indices?
indices trading is the simultaneous exchange of one financial instrument for another, for this reason indices is traded in pairs known as indices trading instruments.
What is a Indices Quote
Because indices instrument is traded in pairs, the stock indexes 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 is a Pip
stock indices is quoted in the format of decimal places. The second last decimal place represents a Pip which is the smallest movement used to calculate profit and loss in stock indices market moves.
Pip means Indices Price Interest Point; it is a one point move in the indices trading quote.
What is 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 and the Micro indices lots which are fractions of the indices trading mini lots.
What is Indices Trading Leverage
Because not many traders can afford to trade standard indices lots which require a lot of money to trade, there is 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 indices trader with capital of $10,000 can borrow up to 100 times using the 100:1 stock indices leverage option and therefore after borrowing using this indices trading leverage the indices trader will have a total of $10,000 multiplied by 100, which means the indices 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 indexes traders can start with little capital of their own and use indices trading leverage to borrow the rest of the money required for trading. The money that the indices trader deposits is referred to as the indices trader’s margin and a indices trader can continue borrowing money using this stock indices leverage option as long as they have the required margin in their account. This is why traders must have the required account balance in their account to open the trades they want to.
What is Margin
Margin is the specific amount of money that a indices 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 indices 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.