Trading the S&P 500 Index

The S&P (Standard and Poor’s) 500 index, as its name indicates, is comprised of 500 publicly held companies, and is the second most-followed index after the Dow Jones Industrial Average. The S&P 500 is larger and more diverse than the DJIA, representing about 70% of the total value of the U.S. stock markets. The companies included are too many to list here but represent all major sectors (mostly in the United States) and include Amazon, Bank of America, Facebook, Johnson & Johnson, Southwest Airlines, and Xerox.

The list is updated periodically. Stocks included must pass a committee and meet specific criteria for market capitalization and monthly trading volume.

The S&P 500: What You Need to Know

  • The S&P 500’s larger sample and diversity makes it a better indicator of the market as a whole than the Dow Jones Industrial Average. Because it is not price-weighted, it is considered by some to be a better measure of the direction of the market than the DJIA.
  • The S&P 500 used to be capitalization-weighted, meaning that price movements in stocks with higher market capitalizations have a great impact on the index. This has since changed. The S&P 500 is now float weighted, which means that the market capitalization is calculated not as share price multiplied by the number of outstanding shares, but as only the shares available for public trading (called the float).
  • S&P index trading is very popular. Experts say that the best time to trade is early in the trading day, with the hours in the middle of the day being the weakest.
  • The S&P reacts to world events such as natural disasters, wars, political unrest, and economic news. It is also important to follow economic data from the U.S., including unemployment rates, job creation, interest rates, GDP figures, and other economic benchmarks.

Anyone who wants to trade the S&P 500 Index should carefully analyze the market conditions before trading.

Trade S&P 500