Indices are a special kind of financial assets, because they are not like any other trading instruments. Indices are averaged data, which characterize the whole economical branches, that is , component index of the price of the summary assets group. Indices usage started in the beginning of XX century by Dow Jones, whose index - Dow Jones, is still a serious indicator of economical situation in different economical branches of the USA, although nowadays this index is strongly changed, added and multiplied in different subgroups.
Nowadays, there are a lot of indices and all their indicators are being formed during trading in stock exchange markets of the world. According to the information of Dow Jones&Co company, in the beginning of 2014 there were more than 3000 share indices in the world.
All indices are usually divided in the following groups:
- individual – which characterize just one element;
- composite – which characterize the changing of the whole set;
- indicators of set quality (for example – 200 similar companies in the country);
- numerical indices (for example prime cost, prices, performance rate).
So, the changing of index quotations means the changing in summary of economical indicator of all segments of the chosen group.
Taking into account the huge number of indices, we can make a conclusion that they include practically all groups of producers and consumers, economical sectors, prices and so on, indices, which we can summarize and appreciate like this. On the whole, indices are for the main markets participants, more as changing indicators than an object of purchase and sale.
At the same time, indices implementation into the technology of binary options trading let traders get the profit even with this kind of the exchange product. Indices are the part of trading platforms of traders as financial assets. So, why not? Indices have quotations in time and quantitative area and they can be for traders an item, like shares or currency pairs.
Why are indices so popular?
- indices are valued by the ,ain market participants because of their ability to give information, as they show the changes not of just one company, but the whole group, a part of which is, sometimes, more than 500 units, this lets make more independent analysis of the existing economical situation in the country;
- indices are used as an instrument of hedging and help stop the possibility of risks in pairs trading of several instruments or assets portfolio, where other kinds of financial assets can be.
Indices options. The main characteristics.
Strike price is used in indices trading. This financial asset is mostly used in options trading of «ONE Touch» и «Range», where the conditions of getting profit is to reach by the price of the given levels. It is connected with the fact that indices motion is inert and they are less quick than all the others. Thus, the changes in economical situation in the country are not able to influence on motion direction of the given asset, which can’t turn quickly and change its direction.
Option type – «Up» и «Down» - PUT or CALL is one more condition for indices trading. A trader, to close a deal, makes a decision to buy or sell an object of the deal. For example, if a trader recognized in FRANCE 40 index a tendency to growing, he makes a decision to buy «Call».
At the same time, if a trader noticed that index IBEX 35 will go on lowering tendency, he will close a deal to sell – PUT.
Strategies of indices of binary options trading
Indices, nowadays, are the same assets as currency pairs, items or shares from stock exchange market. That is why, they apply the same trading strategies to indices as to the other trading instruments. More often, professional traders use unturning indices as an instrument for hedging of open positions. Beside it, indices are included into investments portfolios, betting on profitability of not just one company, but the whole branch.
Moreover, modern traders use indices for trading according to indicators strategies, because the given instrument gives clearer signals than the other ones. Indices are suitable to use them in trading according to mathematical strategies, because their ability not to turn gives a trader a certain guarantee in the using of trading lots multiplication. However, in contrast to the rest of instruments, Price Action are not applied to indices, which let sell on clear diagram.