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S&P500 Tradingview Chart

What is the S&P Index?

The S&P500 Index is an abbreviation for the Standard & Poor's 500 Index, which is a stock index based in the United States. The index tracks the performance of the 500 largest publicly listed US companies (think Apple, Microsoft, Amazon, Tesla) on a weighted average basis and is commonly used as the premier benchmark for US equity performance. The S&P 500 represents a wide cross section of the US share market, and as of January 2022, it's approximate market capitalisation of $40 trillion accounted for 80% of total market value.

How to trade the S&P Index

There are 3 ways to gain exposure to the S&P 500 Index:

  • You can purchase shares in individual companies that are included on the index, this however will only give you exposure to selected components of the index.
  • You can invest in a fund that aims to mirror the movements of the S&P500
  • You can trade the Index via a contract for difference (CFD) which is a derivative product that allows traders to speculate on the price movements of the index

At Global Prime, we offer a S&P500 CFD that can be traded on Metatrader 4, TraderEvolution or Tradingview.

What moves the S&P Index price?

The S&P 500 is compiled using the market capitalization weighting system, which implies that firms with larger market caps have a greater influence on the index. By way of example, in late 2021, the nine largest companies on the index accounted for 28.1% of the total index. Accordingly, an impact on the share price of a particular company can cause a flow on effect and move the value of the index.

Similarly, the performance of a particular sector can directly affect the value of the index. The breakdown of S&P sectors as of late 2021 were as follows:

IT: 27.9%, Health Care: 13%, Consumer Discretionary: 12.8%, Financials: 11.4%, Communication Services: 10.8%, Industrials: 8%, Consumer Staples: 5.6%, Energy: 2.9%, Real Estate: 2.6%, Materials: 2.5%, Utilities: 2.4%

As you can see, the index has a much higher proportion of Tech companies as it does Utilities, Materials. This means that a hit/boom to the tech sector would affect the overall value of the index far more significantly than a hit/boom in the latter sectors.

Why trade the S&P Index (Leverage, Long/Short, Hedging)

There are a multitude of reasons why a Trader would trade the S&P 500, some key reasons include the following:

  • The S&P500 represents a good way of diversifying your portfolio. It's the quintessential product for investors who want to gain exposure to global equity markets, but are wary about getting bogged down in small cap/small volume stocks, which have the highest volatility and risk attached. Trading the S&P 500 allows a trader to spread their risk across a broad range of industry sectors rather than an 'eggs in one basket' approach.
  • Historically, the S&P has returned 10.5% per annum between the years of 1957 through to 2021. This strong history of returns is very attractive for traders who are looking to buckle down and hold positions for extended periods of time. Whilst the S&P has trended upward overall, this is not to say that it is immune from losses. The S&P attracts price volatility and has reported returns in 27% of the time since inception. Ultimately, these price movements can represent opportunity for day traders.
  • When trading with Global Prime, you will receive leverage of 1:100 when trading the S&P 500, allowing traders to gain larger exposure whilst posting only 1% of the total position size as margin. Whilst this can allow for traders to increase their profits, trading with leverage also increases a trader's loss potential. It is therefore crucial to understand the risks of leveraged trading before trading the S&P 500. Leveraged trading on the S&P500 effectively allows traders to get exposure to the index without having to trade on a 1:1 basis.
  • If a trader is of the impression that the S&P 500 is going to trend downward, a S&P 500 CFD allows for a short position to be placed. The ease at which 'Shorting' the market can be done via CFD execution is a big reason why traders enjoy trading the S&P 500.
  • Very fast execution for Index CFDs. If you want to trade the S&P 500, this can be done in a no-nonsense fashion. See our average execution speeds.

How to trade the S&P500 on TradingView

1. Load US500 Global Prime Symbol

2. Locate Global Prime under brokers section

3. Click Connect and follow login prompt

4. Enter your Global Prime TraderEvolution details

5. Place your S&P500 Trade via TradingView

S&P500 Tradingview

What are Indexes?

A stock market index is a hypothetical portfolio of companies that aim to represent a specific segment of the market. For example, the S&P500 represents the 500 largest American companies by market capitalisation. When someone refers to 'the market' being up or down, they are often referring to an index rather than a particular stock.

Indexes can be divided into many different categories, from broad to very specialised, consider for example the NYSEPHARMA which only tracks Pharmaceutical companies in the US, or the ASX50 which tracks only the 50 largest market cap companies in Australia. Indexes can vary in size, composition, and popularity. They're a great tool that allows traders to get exposure to market segments without taking on the associated stock risk.

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