Trade the EURO STOXX 50 Online | FXTRADING.com - International

Trade the EURO STOXX 50 Online

Trade the Euro STOXX 50 with a regulated broker

Try your hand at trading a collection of mega-cap stocks with the EURO STOXX 50 index. Enjoy tight spreads and deep liquidity, regardless of trader size, in an unrestricted trading environment ideal for scalpers, HFT’s (high frequency traders) and automated / EA traders.

A Primer on the EURO STOXX 50

  • Launched over 12 years ago
  • Contains mega-cap stocks from 9 Eurozone countries
  • Market-capitalisation weighted index
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Launched Over 12 Years Ago
The STOXX officially launched on 26th February 1998, making it one of the more recent benchmark indices to be released among the developed world.

Like the DAX 30, it is owned by Deutsche Börse although its focus is on mega-large cap European stocks.

Contains mega-cap stocks from 9 Eurozone Countries
The EURO STOXX 50 includes 50 of the most liquid stocks which represent a blue-chip representation of super sectors from nine European countries. Currently the countries include stocks from Germany, France, Spain, Netherlands, Italy, Ireland, Finland, Luxembourg and Belgium and the index is reviewed September each year for potential revisions.

To be included in the index, the company must come form a Eurozone member state, and be in the top 50 of the broader EURO STOXX index.

Market-capitalisation weighted index
Like many of its peers, the STOXX used a market-cap weighting which means larger-cap stocks make a greater impact on price action of the index than the small-cap companies.

This means it would be prudent for a STOXX50 CFD trader to keep an eye on the larger companies (such as the top 5 or 10).

As of July 2020, the 20 largest equities within the EURO STXX 50 index were as follows:

  • Novo Nordisk A/S
  • Nestle SA
  • Roche Holding AG
  • LVMH Moet Hennessy Louis Vuitton SE
  • Novartis AG
  • SAP SE
  • L’Oreal SA
  • Unilever PLC
  • Unilever NV
  • ASML Holding NV
  • Linde PLC
  • BHP Group PLC
  • AstraZeneca PLC
  • Sanofi SA
  • Royal Dutch Shell PLC
  • Rio Tinto PLC
  • Siemens AG
  • Total SE
  • Enel SpA
  • Anheuser Busch Inbev NV

How Can You Trade the STOXX 50 Index?

The STOXX 50 index cannot be directly traded, so speculators have traditionally accessed it via derivates such as options, futures. However, FXTRADING.com offer access to the EURO STOXX 50 via the STOXX50 CFD (contract for difference), which is another form of derivate.

Unlike a futures market or option, CFDs do not lock you into a contract and by trading with them, one does not become the owner of the underlying market. Yet CFDs still provide access to live market pricing and the ability to trade both long (rising markets) and short (falling markets).

Moreover, with generous leverage available on our index CFDs of up to 100:1, margin requirements are very low making it a more affordable method to trade than futures markets. It also means a trader needs just 100th of the price of the underlying market to initiate a position.

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Long example: STOXX (STOXX50)
A trader buys 5 contracts of the STOXX50 CFD at 3,000

  • If the price rises to 4,000 the trader could exit for a profit around €5,000
    • (# contracts x contract size) x (exit price – entry)
    • (5 x 1) x (4,000 – 3,000)
  • If the price falls to 3,500 the trader could exit for a loss around – €2,500
    • (# contracts x contract size) x (exit price – entry)
    • (5 x 1) x (3,500 – 3,000)
  • A 1% margin requirement with 100:1 leverage requires €150 of capital
    • (# contracts x contract size x price) / leverage
    • (5 x 1 x 3,000) / 100


Short example: STOXX (STOXX50 CFD)
A trader sells 10 contracts of the STOXX50 CFD at 2,750

  • If the index falls to 2,000 the trader could exit for a profit around €7,500
    • (# contracts x contract size) x (entry – exit price)
    • (10 x 1) x (2,750 – 2,000)
  • If the index rises to 3,050 the trader could exit for a loss of around – €3,000
    • (# contracts x contract size) x (entry – exit price)
    • (10 x 1) x (2,750 – 3,050)
  • A 1% margin requirement with 100:1 leverage requires €275 of capital
    • (# contracts x contract size x price) / leverage
    • (10 x 1 x 2,750) / 100

 

Costs associated With CFDs

Spread:
The spread is a minor transactional cost applied to a trade at the point of entry. This means that newly initiated trades will show a minor negative balance, until the market moves enough in favour of the trader to eliminate the cost of the spread.

The spread itself is simply the difference between the bid and ask prices (bid – ask) and can be viewed within MT4 on the “Market Watch” window, the deal ticket or on the chart itself.

The spread is a variable rate and its width (cost) is dictated by the amount of available liquidity. Typically, we would expect the spread to be thinner during active trading sessions (like when the underlying exchange is open). However it is not uncommon to see a spread widen leading into and during a news event, until liquidity returns.

 

In this example, the spread is 1 index point (equivalent to €1).

STOXX50
Bid / Ask:
3318.50 / 3319.50

In the next example, the spread is 2.5 index points (equivalent to €2.50).

STOXX50
Bid / Ask:
3210.00 / 3212.50

Swaps:
Derived from a daily interbank interest rates, swaps can either be a debit or credit to an open trade if held overnight. The STOXX50 CFD swap is calculated in euros and is derived from the ECB (European Central Bank) overnight rate.

It depends on whether the trade is long or short and what the underlying rate is, as to whether it will be a debit or a credit. To view current swap rates within MT4, go to the ‘Market Watch’ window, hover mouse over the STXX50 CFD, right mouse-click and select “Specification”.

Market Drivers for the EURO STOXX 50

  • Global Equities
  • European Central Bank (ECB)
  • Economic data
  • Risk-appetite
  • Earnings Season
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Global Equities
Broadly speaking, global stock market indices tend to track each other more often than they do not. If you compare major indices over long-term charts you will be able to see sustain bull and bear market which have lasted months or even years, although over these same periods some will outperform whilst others will lag. And even on a daily basis, traders will see how indices performed from the prior time zone (ie Asia session) as the sentiment of the prior session can spill over to the current session (ie Europe or US).

This means traders tend to keep an eye of the major benchmarks across the US, Europe and Asia to see how they perform as a whole.

European Central Bank (ECB)
Central Banks can play a pivotal role on financial markets as the have the ability to make or break trends. Central banks use policy tools generally aimed at controlling inflation under control, which is done by raising or lowering interest rates, the money supply and more recently, QE (quantitative easing).

As the STOXX 50 is a European benchmark, then policy actions by the ECB can have a direct impact on the index. Although as many central banks tend to follow the Fed in terms of policy, they also keep a close eye on FOMC meetings as well.

Generally speaking, ‘easy’ monetary conditions such as lower interest rates and QE tends to benefit the broader stock market whilst ‘tighter’ monetary conditions tend ot weigh on equities. Therefore, traders keep close tabs on what is said at ECB meetings, speeches and what economic data is released that helps traders try to predict policy action.

Economic Data
Equity traders are obsessed with potential growth, as an expansive economy is generally supportive of stock prices and therefor indices such as the STOXX. Conversely, a contracting economy can weigh on stock market prices.

Traders use macro-economic data such as business and consumer surveys, consumption, spending, credit, inflation and employment to try and predict where growth could be headed in future. Economic news releases therefore offer tradabale opportunities, depending on whether the data beats or misses the estimates. Generally speaking, larger market reactions can occur following an economic data release, when the difference between economic reality and expectation are the widest.

Risk-Appetite
Sentiment across global markets oscillate between states of ‘risk-on’ and ‘risk-off’. When investors feel confident about the future they tend to buy (go long) risker assets such as equity markets and send indices higher. However, if confidence is knocked it can trigger a ‘flight to safety’ as investors close their risker bets and flock towards safe-haven assets such as gold. Moreover, if investors are spooked enough they may even short equities which can apply further downside pressure on indices.

Earnings Season
Any company that is listed on a stock exchange must release their earnings report at least once every quarter.  At the company level this is not likely to have much impact on the index it is listed, but when we see clusters of earnings reports released over a period of days or weeks (earnings season), it can make a large impact on index performance if enough companies are beating or missing their targets. Therefor traders would be wise to look at earnings calendars to see when earnings season is underway.

Seasonality and the EURO STOXX 50

Some markets such as stock market indices show a tendency to either outperform or underperform throughout certain periods within the year. Two of the popular ones are December’s Santa’s Rally and, as the old saying goes, “sell in May and go away”.

Whilst seasonal patterns are worthy of paying attention to, they are not a roadmap of future returns are they simply show an average of past performance. Yet used with common sense and along other forms of analysis they can aid with a trader’s analysis.

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Santa’s Rally:
It’s generally accepted that stocks tend to perform well throughout December as we head towards the Christmas break. This seasonal is apparent on the STOXX 50 as over the past 30 years it has produced an average return of 1.4% in December.

Sell in May and Go Away:
Due to lacklustre returns through the summer months in Wall Street, this well know saying was born as it was assumed traders would be better to step aside from the markets around May until the summer was over. We can see that average returns for the STOXX 50 in May and June were -0.1% and -0.8% respectively, which supports which seasonal pattern. However, as this ignores intramonth volatility, simply selling short in May is not necessarily a good strategy within itself.

 

Monthly-Close Statistics for the STOXX 50:
Between January 1990 and December 2019 (30 years*)

  • 8 out of 12 months posted positive average returns
  • April and October and December generated the highest, average returns of 2.2%, 1.8% and 1.4% respectively
  • April had the highest ‘win rate’ (bullish monthly closes) of 80%, followed by October and December at 73.3%
  • 4 out of 12 months posted negative returns on average
  • August and September produced the most bearish returns on average at -1.5% and -1.2% respectively
  • June closed lower 60% of the time, with an average return of -0.8% per month

* Whilst the official launch date was in 1998, artificial date has been used to generate data from 1990 via the Reuters platform. We used 30 years of data to achieve statistical significance.   

Why Trade the STOXX50 CFD?

  • Trade long and short
  • Hedge a portfolio of stocks or an ETF
  • Low margin requirements
  • Trade a directional view on European mega-cap stocks
  • Can be used as a proxy for risk
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Trade Long and Short
Being able to trade long and short in rising or falling markets is a luxury not always available to futures or stock market traders. CFDs allows unrestricted trading where direction is concerned.

Hedge a portfolio of stocks or an ETF
Investors who trade stocks can use CFDs such as the STOXX50 to mitigate market risk of their portfolio. Fore example, if they held a small basket of mega-cap blue chips stocks from Europe, they could short sell a STOXX50 to offset risk of falling stocks. This way if the broader market (and their portfolio) were to all in value, their STOXX50 short position would theoretically gain to minimise or even remove the losses sustained on their stocks.

Low Margin Requirements
Margin is the amount of collateral required for a trader to initiate a position and is usually a fraction of the market price. We offer very low margin requirements with up to 100:1 leverage, so you can open an index CFD trade with just 100th of the required capital.

Trade a Directional View on European Mega-Cap Stocks
Whilst global indices can spend a large part of their time with a strong, positive correlation, you will always see stronger and weaker performers among them. If a traders suspects that mega-cap indices across Europe will outperform the broader market, they could then express this view by trading our STOXX50 CFD.

The STOXX Can Be Used as a Proxy for Risk
During bouts of risk-on sentiment we could see mega-cap stocks rally and support the STOXX 50 index. Conversely, traders see a geopolitical or risk-off news driven event, indices such as the STOXX 50 can suffer and bring the bears out of the woods.

Why Trade the STOXX 50 with FXTRADING.com?

  • Tight Spreads
  • Trade the STOXX around the clock
  • No dealing sek
  • Unrestricted trading environment
  • Generous levels of leverage
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Tight Spreads
The lower the timeframe one trades, the more important the spread becomes. FXTRADING.com offer some of the tightest spreads in the industry which makes our trading platform the ideal environment for day traders and scalpers.

Trade the STOXX Index Around the Clock
Unlike the underlying stock exchange, our STOXX50 CFD operates for just under 20 hours a day, 5 days a week. This provides traders access to tradeable opportunities around the clock regales of their time zone, even when the official exchange is closed.

No Dealing Desk
FXTRADING.com are an ECN broker with STP (straight through processing). We have no dealing desk so will never offer you requotes, even in fast-moving markets.

Unrestricted Trading Environment
We allow traders of all styles and size to take advantage of our premium trading infrastructure. Scalpers, HTF’s (high frequency traders) and automated / EA traders are all welcome.

Generous Levels of Leverage
With 100:1 leverage available for our stock market indices margin requirements remain low, which makes index trading the more available to traders of all levels.

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