Introducing EURO STOXX 50
The EURO STOXX 50 is one of the most popular indexes in the stock exchange markets. It was founded in 1998 by the Deutsche Börse Group and is a stock market index that tracks the performance of the top 50 companies in the EU. It is mainly dominated by France and Germany. It is an important indicator of the level of strength in the EU’s economy.
It is also one of the most commonly followed indices and is equivalent to the Dow Jones. The EURO STOXX 50 is a free-floating entity whose market values are not fixed to another entity. An important fact about this index is that it accounts for over 95% of the EU’s free-floating capital. Let’s dive into why this is a great asset for trading and what factors impact its markets.
Why Trade The EURO STOXX 50
The EURO STOXX 50 index can become quite addicting once you’re used to it. Here are some reasons why we recommend trading with one of our favorite indexes. Warning, it’ll make you want to place positions asap!
Leverage
When compared to typical mutual funds and ETFs purchased without leverage through brokerages, trading CFDs with leverage and tight spreads can give a greater possibility for both earnings and losses. You must acquire EURO STOXX 50 holdings in mutual funds and ETFs at a 1:1 ratio, by putting aside the whole amount of the instrument. CFDs, on the other hand, just demand a tiny proportion of the index’s value to be put down. However, any profit or loss is the same as if you had set away the entire position’s worth. If the index is traded at a 1:5 leverage, you must put down 20% of the asset’s value, but with a 1:20 leverage, you just need to put down 5% of the instrument’s initial position value. When the trade is closed, your profit or loss is computed based on the total value of your position, not the amount set aside to begin the transaction. It is critical to understand that when you use leverage, both your prospects for profit and your potential losses are multiplied.
Executions
EURO STOXX 50 has the advantage of being able to be traded with fast executions. This is because it falls under the category of a CFD which can be opened within milliseconds on any platform. This makes the chances of a slippage from occurring pretty minimal. ETFs have an increased risk of facing a slippage because their execution time is much slower and prices can change between the time you click to execute an order and the time the order actually gets executed. These are all factors that you need to keep in mind when deciding which asset to trade and why the EURO STOXX 50 is among the top choices.
Volatility
EURO STOXX 50 is one of the most popular indexes in the world. As a result, it faces quite different market circumstances than the majority of the other indexes in this market. Most of the time, the EURO STOXX 50 trades in a highly volatile market. This is mostly due to the fact that there is always some important economic event taking place somewhere in the world. When a large event occurs, it does demonstrate great volatility on occasion. Worst of all, these periods of instability are highly unexpected. This suggests that analysts are already ahead of the dynamic duo, attempting to forecast when this crucial commodity would face volatile market conditions. As a result, EURO STOXX 50 is quite popular among scalpers, who use these times of volatility to make a quick profit.
EURO STOXX 50 Trading Tips
Whether you’re a novice or an experienced trader, you can never have too many suggestions to aid you on your way. At the end of the day, liability for any loss is returned to us, which means we must proceed with the utmost caution on our journey. Here are some of our favorite trading strategies for the EURO STOXX 50 index:
Trade Timings
The EURO STOXX 50 index is available to trade 24 hours a day, 5 days a week. It is important to note that this does not necessarily mean that it should be traded at any time within this period. Most experts in the EURO STOXX 50 trading prefer to trade this index only during main market hours.
This is because the market is much more liquid during this time and they can get tighter spreads. The main market hours for the EURO STOXX 50 are between 9:30 am and 4 pm EST.
Stop Loss
Stop loss is an important tool to use when trading the EURO STOXX 50 index. It makes sure you don’t incur more losses than you can handle. You can set up any value of your choice for the stop loss. If the S&P index touches this value, the deal will close automatically in a loss. Oftentimes we are unable to keep a watch out on the market at all times. In order to prevent a margin call when we’re away, it is important to put a stop loss on all our trades, even the ones that are doing well. This way we are trading quite safely with no risk of incurring any major losses.
Day Trading
Day trading is a trading approach in which a trade is opened and closed on the same day. All transactions, whether successful or not, must be completed before the market closes. Scalping is a typical trading method for this trading style. Traders would open a BUY and SELL position at the same rate for the same currency pair. This enables them to benefit regardless of how the market evolves. When the market falls, they profit from their opposing position. This method is perfect for NatGas, which may be quite volatile at times. Day trading, particularly scalping, is a terrific strategy to profit from shifting market circumstances during times of volatility.
Factors Affecting The EURO STOXX 50
There are a couple of factors affecting the price of the EURO STOXX 50 index. Each of these that to be watched out for carefully. Here are some top factors to watch closely:
Information Technology Sector
The information technology sector companies together take up a total of 14.2% of the weightage of the EURO STOXX 50. This is among the biggest sectors involved in this index. Therefore, it plays a huge role in determining the value of the EURO STOXX 50. If the IT sector faces a boom, the IT companies on this index will face a positive impact that will increase their market value. This will cause the EURO STOXX 50 to also face an increase in its market share. Similarly, if the IT sector faces a recession, the IT companies on the index will suffer a decrease in their market value. This will cause the EURO STOXX 50 to also face a decrease in its market value.
Industrial Goods Sector
The industrial goods sector companies together take up a total of 13.0% of the weightage of the EURO STOXX 50. This is among the biggest sectors involved in this index.
Therefore, it plays a huge role in determining the value of the EURO STOXX 50. If the industrial goods sector faces a boom, the industrial goods companies on this index will face a positive impact that will increase their market value. This will cause the EURO STOXX 50 to also face an increase in its market share. Similarly, if the industrial goods sector faces a recession, the industrial companies on the index will suffer a decrease in their market value. This will cause the EURO STOXX 50 to also face a decrease in its market value.
Consumer Products Sector
The consumer products sector companies together take up a total of 12.6% of the weightage of the EURO STOXX 50. This is among the biggest sectors involved in this index. Therefore, it plays a huge role in determining the value of the EURO STOXX 50. If the consumer products sector faces a boom, the consumer products companies on this index will face a positive impact that will increase their market value. This will cause the EURO STOXX 50 to also face an increase in its market share. Similarly, if the consumer products sector faces a recession, the consumer products companies on the index will suffer a decrease in their market value. This will cause the EURO STOXX 50 to also face a decrease in its market value.
Chemicals Sector
The chemicals sector companies together take up a total of 9.7% of the weightage of the EURO STOXX 50. This is among the biggest sectors involved in this index. Therefore, it plays a huge role in determining the value of the EURO STOXX 50. If the chemicals sector faces a boom, the chemicals companies on this index will face a positive impact that will increase their market value. This will cause the EURO STOXX 50 to also face an increase in its market share. Similarly, if the chemicals sector faces a recession, the chemicals companies on the index will suffer a decrease in their market value. This will cause the EURO STOXX 50 to also face a decrease in its market value.
Healthcare Sector
The healthcare sector companies together take up a total of 8.7% of the weightage of the EURO STOXX 50. This is among the biggest sectors involved in this index. Therefore, it plays a huge role in determining the value of the EURO STOXX 50. If the healthcare sector faces a boom, the healthcare companies on this index will face a positive impact that will increase their market value. This will cause the EURO STOXX 50 to also face an increase in its market share. Similarly, if the healthcare sector faces a recession, the healthcare companies on the index will suffer a decrease in their market value. This will cause the EURO STOXX 50 to also face a decrease in its market value.
Financial Sector
The financial sector companies together take up a total of 7.4% of the weightage of the EURO STOXX 50. This is among the biggest sectors involved in this index.
Therefore, it plays a huge role in determining the value of the EURO STOXX 50. If the financial sector faces a boom, the financial companies on this index will face a positive impact that will increase their market value. This will cause the EURO STOXX 50 to also face an increase in its market share. Similarly, if the financial sector faces a recession, the financial companies on the index will suffer a decrease in their market value. This will cause the EURO STOXX 50 to also face a decrease in its market value.
Insurance Sector
The insurance sector companies together take up a total of 6.0% of the weightage of the EURO STOXX 50. This is among the biggest sectors involved in this index. Therefore, it plays a huge role in determining the value of the EURO STOXX 50. If the insurance sector faces a boom, the insurance companies on this index will face a positive impact that will increase their market value. This will cause the EURO STOXX 50 to also face an increase in its market share. Similarly, if the insurance sector faces a recession, the insurance companies on the index will suffer a decrease in their market value. This will cause the EURO STOXX 50 to also face a decrease in its market value.
Energy Sector
The energy sector companies together take up a total of 5.5% of the weightage of the EURO STOXX 50. This is among the biggest sectors involved in this index. Therefore, it plays a huge role in determining the value of the EURO STOXX 50. If the energy sector faces a boom, the energy companies on this index will face a positive impact that will increase their market value. This will cause the EURO STOXX 50 to also face an increase in its market share. Similarly, if the energy sector faces a recession, the energy companies on the index will suffer a decrease in their market value. This will cause the EURO STOXX 50 to also face a decrease in its market value.