A large percentage of trading income used to come from trading short term movements in some of the worlds major indices, specifically the FTSE100 and Dow Jones 30. This was a very profitable activity and I still engage in the trading of major indices, though my trading activities have branched out significantly.
- Track the performance of the largest components of the particular indice your trading, as these are the components that really move the Indice one way or another. For example I used to individual track the performance of the 15 biggest companies in the Dow Jones and the 10 biggest companies in the FTSE100. This can easily be done for the Dow Jones by creating a Google portfolio.
- Research what the largest companies in your particular Indice do. For example, a number of the largest companies in the FTSE100 are involved in commodities. So I used to monitor the prices of the relevant commodities to help get a clearer indication of which way the index was heading.
- Get a RSS Feed Aggregator and add the relevant news sources to the feed aggregator. The benefit of having of such an aggregator is obvious as you don’t have to hunt all over the web for the relevant news, but instead you have it delivered to your desktop as soon as the article is published. A comparison of feed aggregators can be found on Wikipedia.
- Charting techniques while I don’t recommend you solely rely on charting techniques but they can be used in combination with some of the other tips included in this article to help you to decide when to enter a position. I personally use Parabolic SAR in conjunction with two short term moving averages.
- Historical study and by historical study I mean look at how the Indice you want to trade has performed under certain conditions. How does poor performance from the top performing companies effect the Index, How do changing commodity prices affect the index etc. These things can help you prepare for future events, even if there is no guarantee that the future will resemble the past.