Indices (definitions)

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From bulls and bears to NASDAQ and Dow Jones, here you can find all the important terms you need to know when you're starting to trade indices.

Bulls and bears – two different types of investors. Generally, bulls are optimistic investors who believe that the market is going to rise. Therefore, they buy shares in the hope that they will benefit from that. On the other hand, bears expect the market to fall (e.g. the market may seem overvalued to them). As a result, bears often sell shares (also through short selling) and wait for a correction.
Bull and bear market – these terms are used to describe the performance of a stock market. A bull market refers to a period when most stocks gain in value, thus the whole market is on the rise. On the other hand, a bear market describes a market that is falling. Share prices usually drop due to the slowing economy. It is said that a true bear market happens when stocks have fallen 20% or more from recent highs.
Local index (WIG 20) – a stock market index from a local stock market. Each stock market usually has several stock indices. The one consisting of blue chip stocks is often considered the most important one, as it includes the largest companies or stocks with the highest turnover. For example, the WIG20 index consists of 20 large companies from the Warsaw Stock Exchange.
Dow Jones - (DJIA or simply “the Dow”) – consists of 30 large companies listed in the United States on the NYSE or the NASDAQ.
S&P 500 - consists of 500 of the largest companies in the United States. It is often considered a barometer of the overall stock market’s performance. The index is a common benchmark as far as active portfolios’ performance is concerned.
NASDAQ - consists of more than 3,000 companies listed on the NASDAQ stock exchange. The majority of firms are technology companies.
DE30 – a contract for index consisting of 40 large companies listed on the Frankfurt Stock Exchange.
FTSE100 - (the “Footsie”) – consists of 100 companies listed on the London Stock exchange with the highest market capitalisation.
NIKKEI225 - consists of 225 large companies listed in Japan.
Hedging – a risk management strategy that is aimed at limiting risks in financial assets. A common practice is to take multiple positions at once in opposing markets, often in derivatives that correspond to an existing position.
Indices rollovers – a technical operation performed by a CFD broker. A rollover occurs when a trader moves their position from the front month contract to another contract further in the future. The operation is profit-neutral from the trader’s perspective.

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Indices (definitions)

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