The Australian Stock Exchange 200 index (ASX 200) is made up of the 200 largest capitalized securities on that country’s national stock exchange and was first opened for business in 2000. Since then, the ASX 200 has come to represent more than 80 percent of the total capitalized value of Australian securities. That’s just one reason traders enjoy buying and selling shares of the ASX 200 index. With an account at an established brokerage like easyMarkets.com, it’s possible for new and experienced market enthusiasts to take part in one of the world’s most actively-traded index securities.
While it is possible to purchase shares of the index outright, many people prefer to speculate on the ASX 200 by using contracts for difference (CFDs), which allow for leveraged trading in order to magnify potential gains. Another benefit of using CFDs to trade the index is the fact that you can choose to take long or short positions and can trade without owning the underlying security itself. Here are some essential tips for traders who opt to take part in the exciting market action on the ASX 200 index:
Keep Your Eyes on China
Australia’s biggest trading partner is China. That’s why it pays to be aware of economic news coming out of that country whenever you decide to take a position in the ASX 200, whether buying shares or using a CFD account. Most of the experienced index traders who are heavily invested in Australian markets keep up to date on both Australian and Chinese business, economic and political news on a daily basis.
Know the Volatile Hours
There are both pre-market and after-market hours on the ASX, as well as an extended night session. Traders who want to do so can trade virtually around the clock on the index. However, there is an unwritten guideline: the most volatile times on the exchange are one hour after the opening bell and one hour before the closing bell. If you want calmer trading times, opt for midday action.
Trade CFDs for Simplicity and Convenience
Trading CFDs lets you take part in the ASX 200 action in a simple, straightforward way. After opening an account with a broker who offers CFD trading, you can begin. For example, if you believe the ASX 200 index will rise before Friday’s session, you would enter into a “buy” via a CFD contract at the current ASX index price. When Friday comes and the index has indeed risen by, say 15 points, you have notched a 15-point profit on your trade.
Research the Markets Before Trading
Always research recent market action before making trades. Go back at least two or three weeks, perhaps longer for large trades, and analyze price action of the index in relation to other markets, political trends and whatever factors you consider to be important.
Try Paper Trading for Several Weeks
People who are relatively new to trading index securities and CFDs often decide to hone their skills for a few weeks with fictitious money, trading it as if it were real cash. This is an excellent way to sharpen trading acumen before putting your real money on the line.
