Forex markets and global equity markets

Most people are aware of the stock markets, thanks to wide media coverage and simply because it is easy to associate buying stake in a company whose products and services you use daily. You use Google search and gmail every day, so buying Google stock has a strong association.

Now consider buying a hot Chinese stock in the Hong Kong market. You need to exchange your USD for Hong Kong dollars. If a lot of people want to buy Chinese stocks, the demand for the Hong Kong dollar rises and increases the currency value.

Before we learn to use stock markets in our forex trading, take a look at the major stock market indices from around the world.


Dow

The Dow Jones Industrial Average (DJIA), also referred to as the Industrial Average, the Dow Jones, the Dow 30, or simply the Dow, is a stock market index, shows how 30 large, publicly owned companies based in the United States have traded during a standard trading session in the stock market.

It is watched by investors across financial markets from around the world since it is a good indication of economic situation and market sentiment in the United States, and also in some ways globally. The 30 companies that make up the index are changed when necessary. Recent additions include Cisco systems (2009), Travelers (2009) and Chevron Corporation (2008).


S&P500

The S&P 500 is a weighted index of the prices of 500 large-cap stocks actively traded in the United States. The stocks included are those of large publicly held companies that trade on either of the two largest American stock market exchanges; the New York Stock Exchange and the NASDAQ.

Today the S&P 500 is the more frequently used benchmark for the US stock market. The Dow, which was once the favourite has fallen behind on account of having just 30 companies against 500 in the S&P.


NASDAQ

"NASDAQ" stands for National Association of Securities Dealers Automated Quotation, was created in 1971 and was the world's first electronic stock market. It is traditionally home to many high-tech stocks, such as Microsoft, Intel, Dell and Cisco.

Today, Nasdaq has more than 5,000 actively traded companies listed on it and boast of having the largest trading volumes.


Nikkei

The Nikkei is short for Japan's Nikkei 225 Stock Average. It is the most important index of Japanese stocks and is the best indication of markets in Japan. It is a price-weighted index consisting of the top 225 companies on the Tokyo Stock Exchange and is comparable to the Dow.


Dax

DAX is short for the Deutscher Aktien Index. Its is the German index that represents 30 of the largest and most actively traded German companies on the Frankfurt Exchange.


FTSE

The FTSE is United Kingdom's equivalent to Standard & Poor's in the United States, is a share index of the 100 most highly capitalised UK companies listed on the London Stock Exchange.


Hang Seng Index

A market capitalization-weighted index of 40 of the largest companies that trade on the Hong Kong Exchange, it gives a pulse of the Asian market – predominantly China. This index is currently compiled by the HSI Services Limited, which is a subsidiary of Hang Seng Bank.


BSE Sensex

The BSE Sensex is the oldest stock index of India. It comprises of the 30 largest and most actively-traded stocks on the Bombay Stock Exchange, calculated by free-float capitalization method.

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