DAX favourite market
- This topic has 9 replies, 6 voices, and was last updated 4 years ago by
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The volatility of any index is directly related to a few different factors.
- How many stocks are in the index.
- What currency are those companies accounts declared in.
- What is the quality of the companies.
The SP500 has 505 stocks in it so one companies share price has little effect on the overall index. The DAX has just 30 companies in it so if one shoots up or down then it has a large effect on the index price.
The FTSE100 obviously has more stocks than the DAX but many of those companies declare in dollars and so what is happening to the dollar can effect the FTSE quite a lot rather than what one companies price is doing as most of the companies values are dragged up and down with the movements of the dollar.
The FTSE250 is more volatile than the FTSE100 despite having a lot more companies in it because the companies have a smaller capital worth and so trading them is more of a casino where you are gambling on a small fry becoming big. This can lead to volatility as money piles into the new best thing and out of last weeks new best thing that turned out not to be that good a thing.
Forex is just the banks playing the numbers and making profit whether a currency goes up or down – which is why it can appear very random and a difficult nut to crack. The banks know where all the orders are and just hoover them up by manipulating the markets to go in whichever direction gets them the most orders.
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