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Trading stock indices: what do you need to know?

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Steve Ruffley

When you think about trading you probably picture a pit full of people shouting at each other, or guys with a phone in each hand, all trading the stock market. This it how it used to be done, for sure, but the nature of trading has changed drastically in recent years. What hasn’t really changed is what people actually trade. The stock market for example, this hasn’t changed… but what is it? Shares in publicly owned companies are traded on stock exchanges around the world, and the price of a company’s shares determines the overall value of that company at a given moment in time. In order to judge the collective value of all the stocks traded on a country’s exchange – and by extension the health of that country’s economy – we refer to stock indices. Each country has its own primary stock index (plural: indices). In the UK it’s the FTSE 100. All indices are named after news agencies, so the FTSE 100 is actually the Financial Times Stock Exchange 100 index. It’s called 100 because it consists of 100 companies, just as, in the US, the S&P…

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Understanding support and resistance levels

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Brett Chatz

When you are analysing stocks, multiple variables come into play. One of the most important concepts to understand in stock trading is trend analysis. Once you can identify patterns being exhibited in the stock market, you will start to recognise the existence of support levels and resistance levels. Resistance levels are price levels that stocks struggle to rise above, while support levels are price levels that stocks tend to stay above. When analysts speak about bullish markets and bearish markets, there is always give-and-take between buyers and sellers. Buyers are the ones demanding stocks while sellers are the ones supplying the stocks. As this dynamic interaction takes place, price levels are formed. The uppermost price that the financial instrument fails to break through is the resistance level and the support level is the base price at which the instrument holds steady. Now, it must be remembered that it is entirely possible for the price of the financial instrument to move outside of this general ‘range’, but the trend is for the price to remain within the support and resistance levels. Many analysts have questioned why prices tend to stick within…

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This content is for information purposes only and should not be construed as trading advice.

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