ahead-of-market-10-things-that-will-decide-stock-action-on-monday.jpg You may have heard of the NASDAQ 100, Nikkei 225 and Dow Jones stock indices during the morning and evening economic news of the day. You might wonder What is a stock index? How is it important? How can you benefit from these indices? This article has the answer for you. 💥What is a stock index?💥 Index (Index) is a measure resulting from statistical calculations. To track changes in what you want to measure or as indicators of various interesting situations such as manufacturing sector index, employment index, service sector index, etc. Stock Index is a number that reflects the price movement of the underlying stock, such as the SET High Dividend 30 Index that reflects the price of 30 companies with high market value. High liquidity and high dividends. The key criteria for stock indices are: Investable and transparent There are mutual funds that are linked to various indexes such as the SET50 and SET100, which are called index funds. Where the difference between the performance of the index fund and the underlying index is called the Tracking Error value. The lower the tracking error value, the more efficiently the index fund replicates the underlying index than the higher tracking error index fund. 💥How to calculate stock index💥 We can divide the stock index calculation into 3 forms. 👉 Market capitalization-weighted stock indices (Capitalization-weighted Index) is a large stock with a high market cap (market value) has a high influence on the index\u0027s dynamics. For example, the S\u0026P 500 (US) and FTSE 100 (UK). ☆ For example, Index A has 100 shares of A at 4 $ and 200 shares of B at 5 $. Market Cap is calculated from share price x total number of shares. Stock A = 4*100 = 400 Stock B = 5*200 = 1,000 Total Market Cap of Index A is 400+1,000 = 1,400 The ratio of Stocks A and B to Index A by market capitalization is calculated as the share\u0027s market cap divided by the total market cap of the index. then multiply by 100. Stock A = (400/1,400) x 100 = 28.57% Stock B = (1,000/1,400) x 100 = 71.43% Stock B has a higher percentage than Stock A in Index A. 👉 Market-weighted stock indices (Price-weighted Index) is that high-priced stocks trading have a greater proportion than low-priced stocks trading, for example, Dow Jones (USA) and Nikkei 225 (Japan). ☆ Example Index A has stock A price 5 $, stock B price 10 $ and stock C price 15 $. Stock A = x 100 = 16.67% Stock B = x 100 = 33.33% Stock C = x 100 = 50.00% Stock C has the largest share in Index A, followed by Stock B and Stock A. 👉 Equal Weighted Stock Indices (Equal-weighted Index) Simply put, every stock has the same proportion. Which diversifies risk better than market capitalization-weighted stock indices But such an index can change more quickly and suddenly. You can also calculate stock indices of your particular interest from the available platforms and websites. You can visit how to builders indexes yourself using 8 here. 💥The Top Popular Index💥 ⚡️The S\u0026P 500 (Standard \u0026 Poor\u0027s 500) is a market capitalization-weighted stock index. It measures the performance of 500 companies listed on the US stock exchange. The S\u0026P 500 is one of the most traded indices and one of the performance indicators of the US stock market. And the state of the US economy as a whole. Examples of companies in the S\u0026P 500 include Apple, Microsoft, Amazon, Berkshire Hathaway, Visa, etc. ⚡️ Dow Jones or Dow Jones Industrial Index is a market weighted stock index. It measures the performance of stocks of 30 large companies listed on the US stock exchange such as Microsoft, Coca Cola, Apple, McDonald, etc. The Dow Jones Index is produced by S\u0026P Dow Jones Indices. ⚡️ NASDAQ 100 First published on January 31, 1985, the NASDAQ 100 (NDX) is a stock index of 100 large companies. (not a finance company) listed on the NASDAQ Stock Exchange It consists of the 100 largest domestic and international non-financial companies listed on the NASDAQ Stock Exchange by market capitalization. ), Amazon (AMZN), Microsoft (MSFT), and Alphabet (GOOG, GOOGL). ⚡️ Nikkei 225 is a daily index measuring the performance of 225 leading Japanese companies listed on the Tokyo Stock Exchange by the Nikkei newspaper since September 7, 1950, 70 years ago. An important temple indicating the condition of the Japanese stock market. It also represents the economic outlook of Japan from after World War II to the present. ⚡️ FTSE 100 is a stock index of 100 companies listed on the London Stock Exchange with the highest market capitalization. With the company\u0027s shares in the FTSE 100 index representing 81% of the total market capitalization of the London Stock Exchange. The FTSE 100 Index is produced by the FTSE Group, a subsidiary of the London Stock Exchange. Examples of companies in the FTSE 100 index are Tesco, Unilever, Barclays, etc. ⚡️The DAX 30 is a market capitalization-weighted stock index of 30 German blue chip companies listed on the Frankfurt Stock Exchange, which is equivalent to the US Dow Jones Index. It fully reflects the real picture of the German economy. The DAX 30 index was first published on July 1, 1988. Examples of companies in the DAX 30 index are BMW, Adidas, Bayer, Deutsch Bank, etc.
INDEX.png In addition to price and volume indicators, there are some indicators in technical analysis that can be used to display general market conditions. To make this possible, traders usually prefer to use indices. Exchanges usually provide their own built-in indices such as S\u0026P or DAX. But what to do when you need to use your own calculation only with the instruments of interest to us? Or use some market (for example, cryptocurrencies) where there are no ready-made indices. In the StockSharp platform, we can create any kind of index from downloaded market data using our own formula. So we can determine the direction of the market as a whole. The index as a method will allow us to determine the direction of movement of this for all the instruments that are included in it. For example, let\u0027s say we want to create an index that compares Apple and Amazon. When we create an index in S# (by using S#.Data index builder), we can see the direction of the trend from the data of the index on the chart. It will show that during this period, Apple is stronger than Amazon if the chart goes up. But if the chart shows a downtrend, then it means that Apple is weaker than Amazon. If the chart shows a flat, it means that both instruments are equivalent at a distance Below we will look at the step-by-step process of how to build index using a simple example, as well as using mathematical functions that allow you to calculate complex trading index. https://youtu.be/WxmGDvqRrWw 🤖 Let\u0027s see how to find Index from all 3 companies: Apple, Amazon and Google. 01_.png 👉 After we downloaded Market Data of Instruments that we need to create the index in to 8 already. 👉 For example I downloaded Apple, Amazon and Google for creating index. 👉 Click on the Securities icon. 👉 On this page will show all Instruments we already downloaded Market Data. 👉 Including the Instruments we want to create INDEX are Apple, Amazon and Google. 👉 Click on Plus sign below. 02_.png 👉 Select add INDEX. 03_.png 👉 Create the name of the INDEX and put it on the ID tab. 👉 Put the formula as an example AAPL@NMS/AMZN@NMS. 👉 From that formula is an Apple device from Amazon. 👉 And then Click verify formula. 04_.png 👉 Click OK, and OK again. 05_.png 👉 The INDEX we just created will show in all the Instruments Market Data downloaded but that INDEX still does not have Market Data because it is just an INDEX. 👉 Click on the Candle icon on the top. 06_.png 👉 Select Timeframe and Date. 👉 And then Click on the Securities tab. 👉 Select INDEX on the left side by Double Click. 👉 The INDEX Instruments will move to the right side. 👉 Click OK. 07_.png 👉 On the Securities tab will change to INDEX we Selected. 👉 On the Build from tab Select Composite elements. 19_.png 👉 Tip for that : We no need to Select Build from composite elements every time. 👉 We can Click save and Select save build. We can save our collation of these Index data without having to recalculate each time. It saves us even more time. When we save the data that we have already calculated The information will be displayed on the Market Data page, which is the real information. 08_.png 👉 Click View Market Data Information. 👉 Click View Candle Chart. 09_.png 👉 This is the Candle Chart INDEX from Apple Vs Amazon by Timeframe we downloaded. 👉 We will do the same way to create another INDEX. 10_.png 👉 Click Back to All Securities. 👉 Create the new name of the INDEX and put it on the ID tab. 👉 Put the new formula. Other an example AAPL@NMS * AMZN@NMS * GOOG@NMS 👉 And then Click verify formula. 👉 Click OK. 11_.png For example, finding an index using a simple equation Multiply all 3 instruments together. For function to find index in 8, put POW(AAPL@NMS * AMZN@NMS * GOOG@NMS,1m/3m) which comes from the word Power in front.. If we Omitting m Hydra understands that it is an integer, not a fraction. So we have to insert m every time so Hydra understands it\u0027s a fraction and not an integer. 👉 And then Click verify formula. 👉 Click OK. And OK again. 12_.png 👉 Select Timeframe and Date. 👉 And then Click on the Securities tab. 👉 Select INDEX on the left side by Double Click. 👉 The INDEX Instruments will move to the right side. 👉 Click OK. 13_.png 👉 On the Securities tab will change to INDEX we Selected. 👉 On the Build from tab Select Composite elements. 14_.png 👉 This is the Candle Chart INDEX from POW(AAPL@NMS * AMZN@NMS * GOOG@NMS,1m/3m) by Timeframe we downloaded. Now we can create an index of all 3 instruments in the interval we choose. You can see that the chart shows the trend direction in the market for all 3 instruments. It was only going up for a while and then something happened that caused the chart to go down significantly. At the time when the chart changes direction, we can look back at the news, events, and changes about the 3 instruments from the past at that time. And quite different from the Chart Index from Apple and Amazon, which is in the direction of only an upward trend. When we find the index of all 3 instruments that we have calculated. And we want to compare that from the index of these 3 Instruments, what kind of trend will Apple stocks be in the market? Now we just compare the Instruments Apple with the index of the 3 instruments that we have already calculated. and see in which direction the chart will be displayed. 15_.png 👉 Create the name of the INDEX and put it on the ID tab. 👉 Put the formula as an example AAPL@NMS/AAG@NMS. 👉 From that formula is an Apple divide from INDEX of 3 Instruments. 👉 And then Click verify formula. 👉 Click OK, and OK again. 16_.png 👉 Select Timeframe and Date. 👉 Click Change Instrument. 👉 Select INDEX instrument by Double Click on Instrument tab. 👉 Click OK. 17_.png 👉 Click View Market Data Information. 👉 Click View Candle Chart. 18_.png 👉This is the Candle Chart INDEX from Apple divided from INDEX of 3 Instruments by Timeframe we downloaded. From the chart we can see that it is an uptrend. This shows us that Apple is stronger than the whole IT sector. You can use indexes in your own trading or analysis (e.g., by exporting calculated data into other programs). Hope this blog is interesting for you. Please comment us what you interesting to know more about S#.Data. We will try to write our next posts.