Are you interested in getting in on the price action of Australia’s major stock index, the ASX 200? In case you’re not familiar with the index, it is simply a regularly updated list of the nation’s 200 largest securities.
Why follow the price changes? Because if you believe you have the ability to anticipate whether the general movement will be up or down, then it’s possible to profit in both good and bad times. For example, when overall economic news is positive, some investors turn a profit by going long. When financial indicators are down, it’s possible to buy CFDs (contracts for difference) that pay off when the 200 decreases in value.
Here are the essential points you need to know in order to take part and profit regardless of whether the market goes up or down.
How to Get In
Individual investors can trade the price of the whole index by purchasing CFDs, ETFs, options, or futures. Options can be risky but have a couple of unique advantages: leverage and loss limitation. Many enthusiasts choose to trade the ASX as a CFD because of the speed and flexibility they offer, plus the choice of using leverage. Note that while leverage can increase the potential profits available, it can also magnify losses, therefore risk management best practices should be followed at all times when trading.
Know the Eligibility Rules
How can companies get their shares added to the listing? There are a few hoops that corporate owners need to jump through in order to get on the exchange. They’re usually happy to do so, because being on the ASX 200 can mean millions of dollars of investment cash flowing into corporate assets.
There are typically three primary rules for getting listed. First, the shares need to already be among those traded on the Australia Security Exchange. Second, something called FAMC, float-adjusted market capitalization, needs to be in the top-200 of all those companies already listed on the board, hence the 200 designation. Third, the shares need to be highly liquid, as measured by a detailed parameter issued by the exchange. A company’s shares can’t be privately held or controlled by just a few people. They need to be readily available for sale and purchase by anyone who wishes to buy or sell them.
How to Follow the Action
There are a few unique aspects of this Australian security that investors need to know about in order to follow it on a day to day basis. It accurately tracks the minute by minute value of the top 200 companies on the Australian Securities Exchange. Investors can follow the constant action in one of two ways. First, they can simply track the individual companies they’re interested in by watching the values move up and down during each session.
However, tracking specific companies won’t reveal the value of the entire exchange. To follow the whole ASX by watching the value of the 200 to see how the aggregate number changes. In 2000, when the index was created, it was set at a benchmark of 1,333, so any changes from that point onward are reflected in the daily number after the index’s name on the exchange board.