Tuesday, October 20, 2009

Why I use S&P500 to find out market direction?

I always use S&P500 to find out the market direction. The reason is S&P500 is based on 500 large-cap common stocks actively traded in the United States. If you study statistics, you will know that the more samples that you have collected, the more accurate is your result. Dow and STI index only has 30 components. So if one or two stocks go up or down by big margin, the index will be affected greatly even though the rest of the stock are unchanged.

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