Your guide to trading ASX 200

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What is the ASX 200 (AU200) and why is it important to traders?

The abbreviation "ASX" stands for the Australian Securities Exchange, which is Australia’s primary stock exchange based in Sydney. The S&P/ASX 200, also known as Australia 200, is a benchmark institutional investable stock market index that was created in 2000. As the country’s most widely followed market indicator, the index serves as the de-facto measure of the value and performance of the nation’s equity market.

Maintained by Standard & Poor's, its constituents are the 200 largest stocks listed on the Australian Securities Exchange chosen by float-adjusted market capitalisation. The index represents roughly 81 per cent of Australia’s total share market capitalisation.

Index trading is a practical addition to financial strategies because it helps to diversify an investment portfolio. As such, traders do not have to invest in separate company stocks. Instead, they can go for an index that already includes the country’s major businesses.

The ASX 200 index maintains its benchmark credibility by imposing high eligibility requirements on its listed companies. Aspiring firms must meet liquidity, market capitalisation and listing standards in order to be included in the index. The ASX 200 is rebalanced by a five-panel “Index Committee” quarterly, ensuring all the criteria are maintained.

trading ASX 200

Traders often choose the ASX 200 due to its exposure to significant market price fluctuations. The index is known for its volume and volatility, attracting numerous day traders looking to profit from short-term price movements. It also serves as the underlying asset for a wide range of derivative financial instruments. 

ASX 200 trading hours

The ASX 200 companies are all listed on the Australian Securities Exchange that follows a typical Monday to Friday schedule. The main trading hours for the index are between 10:00-16:00 (GMT+10:00) five days a week.

If you choose to trade CFDs with Capital.com, you can follow the ASX 200 price in AUD live and trade the index between 22:01 – 21:00 (UTC), from Monday to Friday.

How is the ASX 200 Index calculated?

The ASX 200 is a capitalisation-weighted index. It means that a company’s contribution to the index is relative to its total market value, that is derived by multiplying its stock’s share price by the number of outstanding shares. This implies that companies with bigger market caps tend to have a bigger influence on the ASX 200’s share price

The ASX 200 is also float-adjusted. It suggests that the absolute numerical contribution to the index is relative to the stock's value at the float of the stock. 

While the calculation includes a sum of the constituent stocks’ market capitalisation, the movement of the index only represents the changes in the share price and not the market capitalisation. To ensure that, an index divisor is used.

The divisor helps to maintain the index continuity by eliminating external influences not related directly to the market movement. For instance, if a company increases its market capitalisation by issuing new shares, the divisor is adjusted so that the value of the ASX 200 does not change.

Businesses on the ASX 200 Index

The Australia 200 Index is made up of 200 companies operating in 11 sectors. However, it is significantly dominated by two – Financials and Materials. These 11 sectors are subdivided into 24 industry groups, 68 industries and 157 sub-industries.

Some of the world-renowned businesses included in the ASX 200, among others, are BHP (BHP), Rio Tinto(RIO) and ResMed (RMD).

The index is rebalanced on a quarterly basis: in March, June, September and December. However, if a significant event occurs, such as merger or delisting, an intra-quarter rebalance may be conducted.

How to trade the ASX 200 CFDs

The ASX 200 Index is a great way to gain exposure to the Australian stock market without having to analyse the performance of individual companies. However, like any other stock index, the ASX 200 cannot be bought and sold like an equity.

One of the easiest and most popular ways to invest in the ASX 200 is through contracts for difference, or CFDs. A CFD is a type of contract, typically between a broker and a trader, where one party agrees to pay the other the difference in the value of a security, between the opening and closing of the trade. Therefore, when you trade the index using CFDs, you speculate on the direction of the underlying asset’s prices without actually owning it.

Investing in the ASX 200 CFDs allows you to trade the index in both directions; you can hold a long or short position, depending on whether you expect the price of an asset to rise or fall. For that, CFDs give you the opportunity to profit from both bullish and bearish price movements in the index.

Trade Australia 200 - AU200 CFD

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CFDs allow trading on margin, providing you with greater liquidity and easier execution. However, note that CFDs are a leveraged product, which magnifies both profits and losses.

The ASX 200 Index has good volume and volatility as it is made up of a wide cross-section of liquid trading instruments. It typically offers a high degree of liquidity, tight spreads and long trading hours, making it popular with CFD traders around the world.

Looking for a reliable CFD trading provider to start your ASX 200 investing journey? If so, just spend three minutes of your time to sign up and start your trading journey with Capital.com. Try our award-winning trading platform or download our mobile app, which will become your smart CFD trading assistant.

Why trade the ASX 200 CFD with Capital.com?

Advanced AI technology at its core: a Facebook-like news feed provides users with personalised and unique content depending on their preferences. If a trader makes decisions based on biases, the innovative SmartFeed offers a range of materials to put them back on the right track. The neural network analyses in-app behaviour and recommends videos and articles to help polish your investment strategy. This helps to refine your approach when trading the Australian ASX 200.

Trading on margin: providing trading on margin (up to 20:1 for major indices), with the help of CFDs, Capital.com gives you access to the ASX 200 Index even with a limited amount of funds in your account.

Trading the difference: when trading CFDs on the Australia 200 Index, you do not buy the underlying asset itself, meaning you are not tied to it. You only speculate on the rise or fall of its share price. CFD trading is no different from traditional trading in terms of its associated strategies. A CFD investor can go short or long, set stop and limit losses and apply trading scenarios that align with their objectives. So whether your view is positive or negative, you can trade the index in both directions.

All-round trading analysis: the browser-based platform allows traders to shape their own market analysis and forecasts with sleek technical indicators. Capital.com provides live market updates and various chart formats, available on desktop, iOS and Android.

Focus on safety: Captal.com puts a special emphasis on safety. Licensed by the FCA and CySEC, it complies with all regulations and ensures that its clients’ data security comes first. The company allows to withdraw money 24/7 and keeps traders’ funds across segregated bank accounts.

ASX 200 performance history

The ASX 200 Index often tends to be considerably volatile in comparison to its UK and US counterparts, offering attractive trading opportunities. As with any trading, however, it is not without its risk.

The index was first published on the Australian Securities Exchange on March 31, 2000, with a starting index value of 3,133.3, equal to the value of the broader All Ordinaries Index at the time.

According to the historical ASX 200 Index performance chart, it fell to its all-time low of 2,753 on February 3, 2003. The index then gained a strong upside momentum, reaching 6,000 points for the first time on February 15, 2007. The same year, on October 7, its value peaked at 6,748, right before entering a downtrend. During the infamous financial crisis of 2008-2009, the ASX 200 shed in value significantly, falling to trade at 3,145 by the end of February 2009.

After hitting bottom in early 2009, with the exception of occasional, short-lived negative fluctuations, the index had been mainly in the uptrend for over a decade. The ASX 200 crossed the 7,000 points level for the first time on January 16, 2020. On February 20, it traded as high as 7,162.5.

However, after reaching its record high, due to the Covid-19 pandemic and its implications on the Australian economy, the index has experienced lots of volatility, characterised by multiple price fluctuations. On March 23, 2020, the ASX 200 dropped as low as 4,546, ending the first quarter of the year trading at 5,076.

trading ASX 200

FAQ

Standard & Poor’s is a leading index provider and source of independent credit ratings. It was founded in 1860 and owns the S&P Global Ratings, S&P Global Market Intelligence, S&P Dow Jones Indices and S&P Global Platts brands.

The ASX 200 is affected by a plethora of factors. The earnings reports of the stocks listed are one of the main driving factors of the index. Whether an earnings report is positive or negative can have a dramatic effect on the price of a stock, and hence the index.

Changes to specific industry sectors can also have significant implications on the value of the ASX 200. For instance, when oil prices are low, oil-related sectors like mining, production and construction are suffering, leading to losses in the companies-constituents of the index.

In addition, political and economic shifts that occur in Australia may also affect the index.

Though the ASX 200 is the most frequently quoted index for the Australian stock market, there are a number of other popular related indices. These, among others, include:

  • The All Ordinaries Index;
  • The S&P/ASX 20 Index;
  • The S&P/ASX 50 Index;
  • The S&P/ASX 100 Index;
  • The S&P/ASX 300 Index;
  • The S&P/ASX 200 VIX Index; 
  • The S&P/ASX 200 Financials Index (Sector);
  • The S&P/ASX 200 Materials Index (Sector);
  • The S&P/ASX 200 Information Technology Index (Sector);
  • The S&P/ASX 200 Energy Index (Sector).

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