The CFD traders have a wide choice of indices to be sold around the world, but a question that we are often asked? what? the best index of the United States to sell. The Nasdaq? clearly evident, but Dow Jones and S & indices of both P 500 are cited frequently in the financial press. The Dow? traditionally been the index of the title, but analysts pi? Technical and pi? Fundamental tend to examine the S & P when considered of great economy and the stock exchange in the United States. The reason why this problem? important now? in the last month or so Dow Jones has moved to new levels of all time, passing the peak last seen in January 2000. But the S & P 500? still around 8% off the level seven years ago, so what are they? l? ? cos? much difference? The? s? of It? to do with the way each index? calculated. Dow Jones? with a very simple and money? cumbersome in contrast with the Nasdaq and the S & P that are value-burdened. The latest are calculated by monetary value, or market capitalization of each constituent. There? ? resolved as the parties in the multiplied by the price of the shares and? cos? a good representation of the overall value of the constituents. With a price-weighted index, however, simply a part of each company, adds them all and then calculates a divider, which for the Dow was 30 at the beginning and then registered for the cracks and replacements over the years . The problem with this simple? that companies with more courses? high actions are given pi? weight in Dow Jones. what? happened as an example? that General Electric and Microsoft, which are among the most? Businesses estimated high in the index, has much more weights? small that should be (the bases of GE around $ 35 and MSFT at $ 29, compared told of the Johnson &; Johnson to $ 65). Another problem with a price-weighted index? that any change in the dollar affects a component of the media by the same quantity? that? about 6.5 points, working the current divisor. One can? have a situation where a movement equivalent percentage in action pi? expensive, currently IBM, pu? claimed around five times the estimated constituent pi? low, Intel. Sounds crazy? S? But? s? of that? The Dow sense? calculated. What? as the 30 Dow components compared to the levels of 2000? Nine of the components are above where they were, 12 stocks are pi? 10% below and 15 are pi? 20% below their order of 12 January 2000. Ll of the permit? of? We of? you to judge how important that is a new level on the Dow, though? yet the index? of? the headline? of? of? of? For many CFD traders.
Mike Estrey