S & P 500 Index - Standard and Poor's 500 Index
The Standard and Poor's 500 Index is a Indices that keeps track of the capitalization of 500 stocks that represent major industries in US economy. The list of 500 companies is made up of stocks displayed in NYSE and NASDAQ.
The S&P 500 just like the Dow Jones Industry Average Stock Index is more volatile than most of the other Top Stock Indices, The S&P 500 index will over long term trend upwards but it will have more pull backs and more consolidations than other Indices. Traders may prefer to trade other indexes other than this one if they are more used to trading more stellar trends found in other top stock indices.
One of the reason this stock index has more oscillations than other indexes is because it has more constituent stocks than other indexes. This Stock Index also has a weighting component in its calculation which contributes to making the index more volatile.
The S and P 500 Index Chart
The S&P 500 chart is displayed & displayed above. On above example this instrument is named US 500CASH. As a trader you want to find a broker that provides S&P 500 chart so that you can start to trade it. Example displayed above is of S&P 500 Stock Indices on MT4 Forex Trading Software.
Other Details about S and P 500 Index
Official Symbol - SPX:IND
The 500 components stocks which constitute S&P 500 Index are chosen from the major industries in US economy. The calculation of this stock index is however different compared to other Stock Indices; the price constituent of the 500 stocks also has a weighting component that makes this stock index more volatile than others.
Strategy for Trading S and P 500 Index
The S&P 500 Index approach of calculating makes it more volatile and therefore there are much more wider swings in price movement of this stock index. Although this stock index generally upward over long term because US economy also shows strong growth and is also the largest economy in the world.
As a trader wanting to trade this stock index, be prepared for wider price swing and a little more volatility.
As a trader you want to be biased and keep buying as the index moves upwards. When US economy is performing good (most of the times it's performing good) this upwards trend is more likely to be in-favor. A good indices trade strategy would be to buy the dips.
During Economic Slow-Down and Recession
During economic slow-down and recession times, companies start to report lower profits and lower growth prospect. It is due to this reason that investors start to sell stocks of companies which are reporting lower profits and therefore Indices tracking these specified stocks will also begin to move downward.
Hence, during these times trends are likely to be moving downward and you as a trader should also adjust your strategy accordingly to suit the prevailing downwards trends of the stock index that you are trading.
Contracts and Specifications
Margin Requirement Per Lot - $ 12
Value per Pip - $ 0.1
Note: Even though general trend is generally upward, as a trader you've got to consider and factor in daily market volatility, on some of the days the Indices may move in a range or even retrace & pull-back, the market retracement move may also be a significant one at times and therefore as a trader you need to time your entry precisely when using this strategy: stock indices strategy and at same time use proper equity management guidelines just in case there's more unexpected volatility in the market movement. About money management methods in stock indices topics: What is index equity management & Indices equity management methods.
