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Your guide to trading the S&P 500 index

Capital.com’s guide to trading the S&P 500: Learn everything you need to know on how to trade the S&P 500. No commission. CySEC regulated. Trade now.
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Why is the S&P 500 important to traders?

The S&P 500, also known as Standard & Poor’s 500, is a stock market index that tracks the stock price performance of the top 500 companies in the US.

As the assets of the index comprise an approximate total of $2.2 trillion, the S&P 500 index – along with the Dow Jones Industrial Average (DJIA) – is often used as a gauge for the performance and strength of the US economy.

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S&P 500 trading hours

As S&P 500 companies trade on the NASDAQ and New York Stock Exchange, traders like to trade the S&P 500 index during main market hours between 09:30 and 16:30 EST. Trading during these hours often offers greater liquidity and tighter spreads.

However, you can trade the S&P 500 24 hours a day with Capital.com and monitor price changes and S&P 500 historical data using our S&P 500 live chart.

How to trade the S&P 500 CFD

The S&P 500 price typically provides traders with a high degree of liquidity, long trading hours and tight trading spreads. You can trade the S&P 500 index today using CFDs (contracts for difference). Using CFDs to trade S&P 500 will allow you to go long or short without having to deal with conventional exchanges.

Traders enjoy trading the S&P 500 because trends can often be spotted on live charts, with clear entry and exit signals using both simple and comprehensive indicators.

Since the index tracks a ‘basket’ of 500 US companies, traders who trade S&P 500 are given a diversified exposure to a US stock market – one that is widely covered by analysts who conduct in-depth technical and fundamental research of its performance. As such, the S&P 500 is found to be popular with CFD traders around the world.

As with any form of trading, a good trading strategy is imperative to invest in S&P 500. An effective trading strategy could be one that dampens market noise and enables traders to remain attuned to their entry and exit signals, volume and risk. A good trading strategy often combines technical and fundamental analysis, with sound emotional control.

How is the S&P 500 calculated?

Companies who trade on the S&P 500 index are selected by a committee that assesses the company’s merit according to eight primary criteria. These are:

  • Market capitalisation
  • Liquidity
  • Domicile
  • Public float
  • Sector classification
  • Financial viability
  • Length of time publicly traded on a stock exchange

In addition, any one company must satisfy the following liquidity-based size requirements:

  1. A market capitalisation greater than or equal to $6.1 billion
  2. Annual dollar value traded to float-adjusted market capitalisation is greater than 1.0
  3. Minimum monthly trading volume of 250,000 shares for each of the six months leading up to the evaluation date

S&P 500 companies are selected to be representative of the industries in the US economy (e.g. technology, health, industrial, commodities).

The S&P 500 is capitalisation-weighted, which means that companies with bigger market caps will have a bigger influence on the S&P 500 price.

Like the Dow Jones Industrial Average, the value of the S&P 500 index is calculated through the sum of the market capitalisation of all 500 stocks being divided by the Divisor, where the Divisor is considered to be approximately 8.9 billion. The Divisor is adjusted in the event of stock splits or mergers to ensure that the numerical value of the index is unaffected.

Why trade S&P 500 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 him back on the right track. The neural network analyses in-app behaviour and recommends videos and articles to help polish your investment strategy. This hopefully helps you refine your approach when you trade S&P 500.

Trading on margin: Providing trading on margin (20:1 for major indices), Capital.com gives you access to the S&P 500 index with the help of CFDs.

Trading the difference: By trading CFDs on the S&P 500 index, you don’t 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 his or her objectives. So whether your view is positive or negative, you can trade S&P 500 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: Capital.com puts a special emphasis on safety. Licensed by CySEC, it complies with all regulations and ensures that its clients’ data security comes first. We allow you to withdraw money 24/7 and stores traders’ funds across segregated bank accounts.

Businesses in the S&P 500

If you trade the S&P 500, you will notice that it comprises companies from a wide range of different sectors, including technology, commodities, health and manufacturing. Apple, the world’s first trillion dollar company by market capitalisation, is included in the S&P 500 index.

History of the S&P 500

The S&P 500 index was first published in its current form on 4 March 1957 by Standard & Poor’s, a financial information and analysis company. It began as the “Composite Index” – S&P’s first stock index – in 1923, tracking a small number of stocks.

By 1926, the S&P Composite Index expanded to include 90 stocks, before increasing to 500 in 1957.

Since its inception, it has been widely used as a general measure of stock prices due to its inclusion of both growth and value stocks.

The S&P 500 achieved a record closing high of 2,931 on 20 September 2018. It achieved a record intraday high of 2,941 on 21 September 2018.

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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.

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