Stock market

CAC-40 index in trading: All you need to know

What is the CAC 40 index?

The CAC 40 is the main stock index on the Paris Stock Exchange. It was developed in mid-1988 based on the prices of the 40 French corporations with the largest market capital. These 40 issuers-companies represent 80% of the total volume of the entire French stock market. 

The CAC index in country is the flagship instrument on the Paris stock exchange. The index is regularly quoted in the markets, its indicators change during the Paris trading sessions. Using special platforms and instruments, you can track quotes in real time. 

The Paris CAC 40 quotes are updated during the working week from 9:00 to 17:30 Paris time. Index trading on CFDs takes place at 8:00 am, before the opening of the trading session on the Paris Stock Exchange.

Another specific feature of the CAC 40 share price index is that it is based on the amount of dividends. In other words, it is not the capitalization of companies that is assessed, but the direct profit of investors that they receive for owning shares. This mechanism is unique and has no analogues.

Accordingly, the CAC 40 companies reflect not just the state of the economy, but real earning opportunities for investors. Therefore, there is always a high excitement around this index, which makes the asset quite liquid and in demand.

How does it work? 

If the minimum indicators on the daily chart at 5330 are influenced by the sellers’ market, bearish indicators will be able to confirm the breakdown of the minimum quotes of the daily scenario, which will be determined by the trading terminal.

The support level of 5000 percentage points is important in order to further fix the possibility of entering a sale at 4650 points. The daily CAC 40 index shows a correction, and when it is over, you can assess the market more accurately. When the market fixes an indicator of 5400 percentage points, the trader can analyze whether the trend will be high, and whether it is worth waiting for the breakout of the 5500 percentage points level.

Methods for calculating the CAC 40 index

During the trading session from 9:00 to 17:30, market participants can trade CAC 40 CFD indices on short and long positions. The largest and most profitable companies from France are selected for the index, and this is an indicator of the economic situation in the French state. 

The trade index includes companies operating in different economic areas. This helps to make a more accurate analysis of the entire business environment and the economic situation of the country. The indicators of companies are updated. Note that the participants in the top-40 list can be replaced due to a changi situation in the markets, the global economy, and the country’s economy

How is the CAC 40 index chart calculated? There are a number of expert economists who quarterly evaluate the companies included in the top-40 list. Based on the new data, specialists can exclude a company from the CAC-40 list and change it to another one that will be more relevant to the current market situation. 

The mechanism of forming the CAC 40 index

This index is quite mobile, since companies are assessed every 3 months. If more worthy contenders appear, they take the place of corporations whose shares have lost in value. This technique allows maintaining the CAC 40 at a consistently high level.

How can a company get into the CAC 40 list?

  • It must have a sufficiently high liquidity of shares on the stock market.
  • The issuer must have enough capital.
  • An ongoing exchange of its shares should be performed.

The issuer’s activities are carried out on a quoted market. The higher the demand is in the economic sphere in which the company operates, the more likely it is to get into the CAC 40 index.

The CAC stock commission changes the list of companies on a quarterly basis. Changes can be as insignificant (by 1-2 points), or serious, when over 5-10 companies are being replaced. At the same time, a company that left the CAC 40 list can return to it again by improving its financial performance.

The CAC 40 index shows the state of the French economy by evaluating the price of shares of selected forty issuers traded on the French stock market. The issuer has more weight than other companies when the cost of turnover capital exceeds others. 

For example, in 2015, once again reviewing the CAC 40 today list, the experts decided to replace the EDF financial group. The controlling stake in this company is under government control. Instead of EDF, the specialists chose the Klepierre company. 

The EDF Group has been listed on the Paris stock exchange for about a decade, having a capital of US $24.7 billion. It was replaced by Klepierre with a capital of $13.2 billion. Experts decided to give preference to Klepierre, since EDF gave most of its CAC shares to the state. 

As a result of this distribution, the liquidity level for EDF shares reached only 15%. If we compare this figure with similar levels of sales of securities of other issuers on the Paris stock exchange, it is worth talking about too low transaction rates in EDF. 

The calculation of the CAC 40 trading index is based on the analysis of dividend payments, and they do not go into reinvestment, which is allowed in the DAX 30 trading index.

Impact of the global market on the CAC 40 trade index

The CAC 40 index today and always has a significant correlation with the United States markets. For now, the French index has increased its correlation to 86% with the S&P 500.

According to Bank de France research, the Paris stock exchange will be influenced by past trading sessions in the United States by up to 58% of the time. The US stock market closes the trading session at 22:30 Paris time, and the French stock market starts trading at 9:00. 

The United States market has a significant impact on other markets. Big ups and downs produce strong spikes and price swings. The amount of money in circulation on the New York stock exchange is ten times the volume of the French stock exchange – that means explains its influence.

It is also important to note that most French companies do business closely with the United States. This is the reason for a strong connection with the S&P 500 index. According to research by Bank de France, a CAC 40 share price follows the US index 60% of the trading time.

The independence of CAC 40 index

This is a completely independent financial instrument. Although it has a correlation with some other indices, it must be studied separately, using an individual approach. Analysis of other indexes can be used as additional test methods for assessing the trend.

How to trade the CAC 40 index

Traditionally, those wishing to trade the CAC 40 index invest in it directly on the exchange or through brokers. Traders can also invest in complex instruments that include an index. 

Trading in the CAC index includes derivatives: index funds, mutual funds, options, futures and tokenized assets.

Traders around the world can take advantage of investing in CAC 40 tokenized assets, i.e. crypto derivatives whose value is tied to the price of a particular stock, index fund or index. A token is registered through a distributed network in the same way as a cryptocurrency. This technology allows for transactions with cryptoassets without converting them into traditional fiat money, and also makes investments in tokenized assets inexpensive and maximally secure.

When trading on a crypto CAC stock exchange, you can place short and long positions depending on whether the investor expects the price to rise or fall. If you assume that the price will fall, then you can trade short, if you think that the price will rise, trade long. Trading the CAC 40 Index on talso allows you to take advantage of leverage up to 1: 100.

Trading by Fibonacci levels with CAC index live

It’s possible when the correlation with the S&P 500 is quite high. Traders can use this information to build a smart trading strategy ahead of time. It’s enough to study the news reports on the trading session in the US to have a fairly complete idea of how the CAC 40 index will behave. Of course, you should not equate it with the S&P 500. For quality trading, you need to use analytics and navigate the news of the French economy.

Recommendations for trading CAC 40 index futures.

If you pay attention to the short timeframes, you will find that the chart is extremely volatile in the 5-15 minute intervals. Moreover, price spikes are completely unpredictable. First, it creates multiple distractions when working with technical indicators. Secondly, it makes scalping almost impossible.

The minimum reasonable time to open positions at CAC futures 40 is 30 minutes. In such an interval, the Stochastic oscillator and the Moving Average can provide some reliable information about the strength of the trend. Take this into account when building a trading strategy.

It should also be noted that the greatest activity on the market is observed in the first half of the day. Even if you see prospects for a reversal or bounce, do not take counter trend trades. The total mass of orders will not allow quotes to deviate from the formed rate.

Avoid long positions. Unlike stocks and other primary financial instruments, derivatives are profitable solely through changes in volatility. They have no value by themselves. This means that the more trades you make, the higher your income. Therefore, there is no point in opening long positions and wasting time.

How to develop a strategy for CAC futures investing? Having a trading terminal at your fingertips is a must: you can use all the tools to track 40 index live info and improve the CAC 40 strategy and optimize trading orders for maximum profit.

Advantages of trading on the CAC 40 index

Trading with the CAC 40 index has a number of advantages that both specialists and traders highlight in their reviews: 

  • Thanks to this trading index, the market participant does not miss any trading opportunities. He can profit from fluctuations in prices, as well as trading strategies that are formed through opening gaps and ranges in the market.
  • A market participant gets narrow spreads for confidence in trading positions and quick decision-making in the market.
  • Trading on the CAC stock market is associated with financial products that are influenced by economic news, statements from influential people, and financial statements. Market participants who choose to work in the stock markets can plan steps more clearly and conclude profitable transactions more often.

Thus, in order to succeed with CAC index live today, you just need to follow the news field, financial indicators, state and trends in the global stock markets (in particular, the Asian and United States markets).

For example, if you noticed that the trading session in the United States in the previous period and the overnight trading session in the Asian market show the same trend. Most likely this indicates a similar reaction in the European stock market.cac index live today.

Disadvantages of trading with CAC 40

  • When trading with leverage, additional risks arise.
  • You still have to pay commissions: spread, storage costs and commission.
  • 40 market leaders have already experienced a period of rapid growth and will not show supernatural profits.

Summing up

The CAC 40 index measures the health of the French economy and is a comprehensive measure of the financial health of the 40 largest companies in the country. It is calculated in proportion to the dividends that holders of shares of enterprises can receive.

To analyze the CAC index today, it is necessary to monitor the state of the most significant sectors of the French economy. It is also important to observe the value of the American S&P 500, which is strongly correlated with the index. Given this, the CAC 40 cannot be called a simple trading instrument.

At the same time, this index provides incredibly high volatility, has a wide trading range, and is easy to predict. It is worth taking your time to study it.
CAC futures live index is a great way to make money in a fairly free niche. Having mastered this tool, you will receive a stable income and a minimum of risks on the transaction.

Amar Rupinder Gupta

Indian analyst in the field of trading in the forks and binary options markets. Writing about the successes and failures of banks, investment companies, and major traders. Stories about fraudulent schemes in investing and market news. Lessons in investing and portfolio management. Graduated from ICFAI University.

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