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S&P 500 or SP5/USD – an index that belongs to the rating agency Standard & Poor, launched in 1923. Calculates the weighted average of 500 shares of firms that represent the US economy.
The market capitalization of a company within the S&P 500 is calculated by multiplying the current share price by the remaining. S&P uses only floating stocks that are traded and adjusts the market capitalization of the company to compensate for new share issues or mergers of companies.
The value of the index is the sum of the corrected market limits of each company, which to be divided into the secret divider. Information about it is confidential.
Furthermore, S&P 500 uses the method of the weighing of market capitalization. It ensures a higher percentage of distribution for the companies with the most significant market capitalization. The DJIA, in turn, is a price-weighted index that gives companies with higher stock prices a higher index weight.
S&P 500 is the most famous American index of investors and traders. They turn to it because it is focused on a sector with large capitalization, as well as a somewhat floating index. It is considered more representative in the US stock markets.
It does not matter what kind of trading you do: short-term or long-term, dealing with the SP5 index will give you a moving position on US exchanges.
The following reasons for trading can be distinguished. SP5/USD provides bright technical chart patterns that have clear entry and exit signals. Due to tight spreads, transaction costs are usually inexpensive. The index is covered in detail by experts; in their materials, they typically conduct detailed technical and fundamental analysis.
The analysis is needed to implement an effective strategy that will reduce market noise and focus on entry and exit signals.
Pay attention to economic news. Changes in consumer prices, interest rates, and GDP may affect the index. For example, high-interest rates yield high yields on government bonds. This forces investors to switch from stocks to relationships for-profit and lower risk for capital.
Due to increased pressure from sellers, such a transition leads to lower prices for SP5. It is necessary to follow similar trends when creating a strategy.
Here are a few of the technical indicators that can be used for analysis: Relative Strength Index (RSI), Moving Average Convergence (MACD), and the Stoch indicator. A strategy for trading SP5/USD may also include combinations of price action, support and resistance levels, trend channels, moving average price patterns.
Let’s say RSI fell below level 30, and then the market may be oversold. If traders have identified an uptrend, they should use this information as a buy signal.
It is better to trade the S&P 500 when the primary market is open: from 9:30 a.m. to 4:00 p.m. Eastern time. At this time, the index is considered more liquid, which means that spreads can be narrower.