What is CAC 40: online index quotes chart and prospects for the French economy

The CAC 40 is the main index of the French stock market, representing the most prominent companies in the French economy. The CAC 40 is one of the world's major stock indices and comprises the 40 largest companies by market capitalization on Euronext Paris, France's largest stock exchange. France makes up about a fifth of Europe's entire economy, so it's important for traders to keep an eye on the CAC 40 Index to determine where the European economy is headed.

To understand what the CAC 40 index is, you need to understand the name. The abbreviation "CAC" originally stood for "Compagnie des Agents de Change". This was a group of brokers that operated the Paris Stock Exchange since at least the 16th century. The initial opinion has changed, but the acronym remains.

Companies in the CAC 40 represent around 20% of market capitalization in Europe, which shows how influential it is. It is also closely linked to the Euro Stoxx 50 Index, where they have almost 20 companies in common. CAC often attracts the attention of international investors, with almost half of the CAC 40 shares owned by non-residents and a quarter by investors outside the eurozone.

Which companies are included in the index?

The total capitalization of CAC 40 is € 1,535 billion, which is 80% of the total capitalization of all companies that are listed at auction.

That is, the top 40 companies make up the majority of Euronext Paris' capitalization.

Index calculation method

The CAC 40 Index got its name from a time when the formula depended on the size of the market capitalization. In 1987, this was normal, since large companies always had expensive shares (startups had not yet become widespread).

And in our time, small companies can have more expensive shares, and in general be more successful than mastodons. To account for this, CAC now includes the number of shares outstanding. Now most indices in the world have such a formula.

The general formula for CAC 40 looks like this:

How and where to make money on the index

An index and an investment portfolio have a lot in common. An index is a group of stocks, and so is a portfolio. So it turns out that you can copy the composition of the index in your portfolio. Then the investor will receive the same profitability as CAC-40.

And yet I do not recommend doing this.

The composition of the CAC 40 is reviewed every quarter. In addition, organizing 40 transactions to purchase securities is tedious and expensive. You can transfer this whole routine to someone else and not lose anything.

I'm talking about ETFs. The fund manager maintains a portfolio of shares using investors' money. The portfolio always copies the index, it is updated. So when you buy a fund, you are investing in all of France's blue chips without spending a lot of time.

Read more about ETF funds here. To access the exchange, you will in any case need a broker: ours or a foreign one.

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Warning

Many readers will be more confident in Forex and Binary Options than in an ETF.

And all because scammers present these casinos as a real tool for making money: they pose as brokers and organize training courses. But that doesn't mean anything.

Options are a tool for investment funds with a budget of millions of dollars. They are not available for trading on the Forex exchange, and even more so on binary options platforms. All of them are a sure way to lose all your money in pursuit of super profits.

And this will not change either fundamental or technical analysis. Remember: there is no reliable way to predict market movements that are updated every second. And everything that concerns BO and Forex has nothing to do with the real stock exchange, stocks or bonds.

How to invest in CAC 40 CFDs

CFD stands for Contract for Difference and acts as a form of derivatives trading. In recent years, CFDs have become a popular method of online investing. It can be applied to indices, commodities, currencies and stocks. But first, you need to figure out what you need to trade CAC 40 CFDs. As a trader, you cannot buy indices including the CAC 40 because they are just guidelines. However, this does not mean that it is not suitable for trading at all - this is where you should go for CFDs. There are many benefits to using this particular tool and it is worth understanding why.

When you deal with CFDs, you are not actually buying the underlying asset directly. Instead, you enter into a contract with a CFD broker and buy or sell a certain number of units for a specific financial instrument. It doesn't matter where the market is going - CFDs are suitable when you expect prices to go up or down.

Advantages and disadvantages of CFD CAC 40

If you are interested in working with CAC 40, it makes sense to enter the market using CFD. With CFD you can:

• Use CFDs as a faster and more accessible means of trading;
• Increase risk exposure with less capital using leverage;
• Take advantage of all market movements;
• Save money from stamp duty exemption.

At the same time, you should not lose sight of some of the disadvantages associated with this technique:

• When trading with leverage, additional risks arise;
• You will still have to pay fees: spread, storage costs and commission.

When you trade CAC 40 with CFDs, you can use leverage to increase your profits in a relatively short period of time. However, you can only do this if you choose the right French stock exchange index strategy. You can use the usual strategies, but do not forget to take into account the specific characteristics of CFD:

• Bull Market - Even during rising markets, prices inevitably go through periodic periods of consolidation or recovery. Try swing trading to capitalize on these small reversals for maximum profits.
• Bear market. Since CFDs allow you to trade in all directions, you can go short when prices fall. Thus, even in turbulent periods you can profit from the buy-in in terms of fra40.

What affects the price

These factors affect all European indices, including the CAC 40:

1. Dollar exchange rate. A stronger euro hurts EU business because it is America-centric.
2. A wave of social upheaval. Europe has long been a battleground for human rights. New strikes have a detrimental effect on the economy.
3. Sanctions. The European Union would be happy to trade with Russia and the Middle East, but disagreements prevent the creation of partnerships.

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Speaking about France, I will mention investors. Half of those who invested in CAC are foreigners. This means that even if French companies are reporting well, investors could still pull money out of Euronext and push the index down. After all, they take into account the reports of not only French, but also Western companies.

Another non-obvious factor for the CAC 40 review is the situation in the Western labor market. More than two thirds of the employees of the top 40 companies work abroad. A strike, a change in labor or tax legislation - and the quotes changed.

When does the CAC 40 market open?

Trading in the stock market does not occur around the clock. SAS 40 opens at 7 a.m., but the order list is formed until 9 a.m.

Direct trading is carried out within 8 hours, when the CAC 40 market opens for real - from 9:00 to 17:30. After the end of trading, the gong is heard and over the next five minutes the last transactions are closed and the results are summed up.

CAC 40 is a great asset to diversify your portfolio. It is open to the most famous French companies and provides decent and reliable profits (if done correctly).

Forecast, analytics and prospects

A European portfolio cannot do without this index. The point is not only that the largest companies in France were included in it. Another indicator is derivatives, which are created based on the CAC 40. When the same index becomes the basis for both long-term and short-term investments, it means a lot.

If you still doubt how much you can trust the Frenchman, here are the numbers. The top 40 showed ETF returns of 8% over 5 years, and the American old Dow Jones - 13%.

CAC 40 Index Analysis - Monthly Chart (M)

Let's look at an example of chart analysis.

The MT5 trading chart shows a triangle formation between the July 2007 peak of 6,170.30 and the March 2009 low of 2,463.50. This triangle is confirmed by tests of the upper and lower boundaries, respectively, to 5,287.10 for April 2015 and 2,691.80 for September 2011.

The central level of this triangle is determined at 4,109.80 points. This key level played the role of resistance and support several times during the long period of consolidation.

In March 2021, exchanges crossed the upper limit of the monthly triangle. As part of a bullish trend at the monthly level.

The price has remained above the exponential average of 50 since the beginning of the year, which shows a clear upward trend in the CAC 40 price here.

The MT5 Supreme Edition Mini Terminal indicator shows here:

• Bullish trend
• Positive impulse
• Positive force
• Close above the latest May 2021 monthly high of 5,475.47.