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Why is index trading so important?
A stock market index (also known as a "stock index") is a measure of the overall performance of a stock that tracks and evaluates the performance of a particular market, region, or country's economy.
Most highly developed and developing economies have at least one financial index. For example, the S & P 500 index, which includes the stocks of the top 500 U.S. companies and accounts for 70 percent of the overall financial value of the U.S. stock market, provides a glimpse of the overall U.S. stock market.
Why trade indices?
Index trading is a relatively safe form of trading with comprehensive money management characteristics, and its trading risk is always lower than the risk of investing in individual stocks.
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Small maneuverability. Indices are the least manipulative financial instruments whose price fluctuations depend on changes in the share prices of the constituent companies.
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Flexible fund management plan. Trading indices, you no longer have to put all your eggs in one basket, and diversification is more effective in reducing trading risk. Trading the NASDAQ 100 is equivalent to investing in the top 100 most influential high-tech companies in the United States at the same time. Select CAC 40 That means investing in the petrochemical industry.
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Lower risk. Although the index may also fluctuate due to factors such as geopolitical events, economic forecasts and natural disasters, in fact, a 10% rise or fall is considered a historic event in the index market, it's in the headlines.
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Zero risk of bankruptcy. Unlike individual companies, there is no bankruptcy in the index. If one of the DAX 30 components declares bankruptcy, the position will be replaced by the 31st Company in the list of leading German companies. However, if you hold shares in the company, you will automatically lose this investment.
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Advantages of the global economic situation. By investing in a range of companies, you can benefit from the positive or negative dynamics of the global economy. If a company goes bankrupt, the index is still likely to rise.