Business

A secondary source of income is here!

These days, individuals are not happy with whatever they earn, so they keep looking for secondary sources of income. Trading and investing in indices is becoming one of the popular sources of secondary income, and once trading is called indices traders. One needs to analyse the market, predict if it will rise or fall, and put their bets accordingly.

What are indices in the stock market?

Indices trading is means by which traders attempt to make profits from price movements of indices. Various indices are available for trading and measuring the performance of different markets. Single index or multiple index trading is possible; this entirely depends upon the trader and their strategy.

How are stock market indices calculated?

Stock market indices are calculated based on the market capitalisation of their component company. This way, companies provide more significant weight, which means performance will affect index value more than the company. Price-weighted ones have a massive effect on the current price of the index.

What affects the price of an index?

  • The company’s financial result: The company’s profits and losses causes the share prices to decrease or increase, affecting index prices.
  • Commodity prices: Different commodities affect different indices prices. Any fluctuations in the commodity market affect the index’s prices.
  • Economic news: Central bank announcements, investor sentiment, or other economic events also affects underlying volatility, which causes a change in index prices.
  • Company announcements: Company leadership changes or merges can also affect index prices positively or negatively.
  • Change of index position: The addition or removal of companies affects the indices prices.

Why should one trade indices?

  • Go long or short: When index trading, one can go long or short. Going long means buying a market because one expects the price to rise, and going quick means one expects the price to fall. One’s profit or loss is determined by the accuracy of the prediction and overall market movement.
  • Trade with leverage: This means one only needs to commit a small initial deposit to open a position in a large market. In trading with leverage, one’s profit or loss is calculated based on the total position size, not just the marginal size.
  • Hedge existing positions: An investor with different shares might go short with an index to protect themselves from losses. If the market is down and loses value, the short position will increase its value, offsetting the losses. However, if the temporary position increases value, it would cancel a proportion of the profits made. One can also hedge the risk of any price with a lengthy post on the index. In this case, the rise in the index will lead to profit, and it will counter the losses in the short position.

Benefits:

  • Secondary income: It is a top-rated secondary source of income. Individuals usually get a good idea of savings they want at the end of the month by these means.
  • Massive profits: Individuals who can analyse the market status and perform accordingly can benefit significantly from this. Smart investments and playing the right card can help the investors and traders a lot.

IC Markets is the best place to start indices trading now. They also have a free demo option, which means one has sufficient time to analyse the data and set up strategies before putting in real money. After knowing what indices are, there’s no time to wait! It’s time to earn.

In conclusion, indices traders need to analyse the market strategies to trade accurately and benefit from them.

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