How to Trade the CAC 40 Index
The CAC 40 index is used as a benchmark for the French stock market and reflects the overall performance of the 40 largest companies by market capitalization listed on the Euronext Paris stock exchange.
In this article, we cover in detail what the CAC 40 index is, what companies are in the CAC 40, the history of the index and how to trade or invest in the index using exchange traded funds (ETFs) and contracts for difference (CFDs).
We’ll also cover a few cutting edge trading tools you can access for FREE that can help you find actionable trading ideas at the click of a button to supercharge your trading!
What is the CAC 40 Index?
The CAC 40 stock index is used as a barometer for the French stock market as it reflects the performance of the 40 largest companies by market capitalization that are listed on the Euronext Paris stock exchange.
The Euronext exchange was formed in 2000 from the merger of the Paris, Brussels and Amsterdam stock exchanges. The Euronext exchange also bought the New York Stock Exchange in 2007.
So what does CAC 40 mean? The name is derived from the original quotation system used by the Paris stock exchange called Cotation Assistée en Continu which means Continuous Assisted Quotation.
How to View the CAC 40 Price
There are many different ways to view the CAC 40 index price. A search for CAC 40 index Yahoo Finance or CAC 40 index Bloomberg would show you the live price of the index. However, you can also view the CAC 40 index live directly from the MetaTrader 5 trading platform provided by Admirals (formerly Admiral Markets).
This allows you to see the price fluctuations throughout the day across different time frames, as well as trade directly from the chart if you want to try and profit from the price movement of the index. You can also find what time the CAC 40 closes and opens from the platform too.
To view the live price chart of the index, follow these simple steps:
- Open your MetaTrader 5 trading platform, or download it for FREE here.
- From the top menu, select View and then Market Watch, or press Ctrl+M on your keyboard.
- At the bottom of this Market Watch window, start typing CAC 40 and it will provide you with a selection of instruments.
- Once you’ve selected the right instrument, simply drag the symbol name on to the chart to view the live price.
Source: Admirals MetaTrader 5, CAC40, Monthly - Data range: from 1 Feb 2008 to 6 Apr 2021, accessed on 6 Apr 2021 at 12:30 pm GMT. Please note: Past performance is not a reliable indicator of future results.
The chart above shows the long-term price movement of the index from 1 February 2008 to 6 April 2021. It’s clear to see the choppy price action that has developed over those years. Price generally moved higher between the 2011 lows and 2020 highs.
During the coronavirus pandemic in 2020, the price fell drastically as global stock markets crashed. However, what is most interesting is price fell to historical horizontal support around the ~3,932.00 level. Price had historically turned here in 2014 and 2016.
Since the retest of this level, the price of the index is now back up to where it was before the coronavirus pandemic sell off. This is also around the all-time high price level for the index, making it a very interesting stock market index to follow!
Did you know that you can also view live prices of thousands of different markets directly from the MetaTrader 5 trading platform? You can also trade or invest directly from the chart and access a ton of useful trading tools.
Start your FREE download today and see the platforms awesome features for yourself by clicking on the banner below:
What companies are in the CAC 40?
The CAC 40 index rules means that the composition of the index is reviewed quarterly by an independent committee. At this meeting, the 40 companies that make up the index are chosen. This is determined by the total value of the company’s turnover from the prior 12 months, and its overall market capitalization.
Some of the world’s most recognised brands, stocks and companies are included in the index. This includes companies such as Airbus, Danone, Renault and Total. However, there are also a lot of well known fashion brands in the index such as Hermes International, Kering, L’Oreal, LVMH and others. A full list can be found directly from the Euronext exchange’s website but are also highlighted here:
Publicis Groupe SA
Source: Euronext, 6 April 2021
Did you know that with Admirals you can invest in many of these French companies through the Invest.MT5 account?
In fact, you can access stocks, shares and exchange traded funds (ETFs) from 15 of the largest stock exchanges in the world! The Invest.MT5 account has low commissions from just $0.01 on US stocks and you can open an account with just €1, or start with a FREE demo trading account.
You can learn more about the investment account and open a live or demo account today by clicking on the banner below:
Why Trade the CAC 40?
There are many different reasons why an investor or trader would want to trade the index. There are also a few different ways to gain exposure to the index which we will cover.
The CAC 40 index is one of the most liquid stock market indices in the world. This means you can buy and sell the index very quickly which is ideal for short-term traders.
Long-term investors also follow the index as France represents a large portion of the European economy.
A common question for newbies investors is what is the difference between the CAC and DAX?
- The CAC 40 represents the 40 largest companies on the Euronext Paris exchange.
- The DAX 30 represents the 30 largest companies on the German stock exchange.
How to Trade the CAC 40
There are a variety of different ways to trade the index which largely depends on the individuals trading or investing style. Are you a short-term day trader, a medium-term swing trader or a long-term investor for example? The first step in answering these questions is to understand more about the different ways to trade the index and what is available to you.
Index Futures and CFDs
With Admirals, you can trade on cash indices via CFDs, as well as futures indices (such as CAC 40 index futures) via CFDs. A cash index shows the price of the market at the current point in time, whereas a futures index is separated into different months in which you trade a contract that depicts one of those months.
CFDs, or contracts for difference, allow you to speculate on the price of the underlying asset class. This means you never actually own the index unlike purchasing real stocks or shares in a company that you own.
With CFDs, you are merely speculating on price moving up or down. As you are trading a derivative of the index you can trade long and short to potentially profit from rising and falling markets.
If you believe the market will rise in value you use the ‘buy’ feature. If you believe the market will fall in value you use the ‘sell’ feature, as shown below.
Source: Admirals MetaTrader 5, CAC40, Daily - Data range: from 16 Jul 2020 to 6 Apr 2021, accessed on 6 Apr 2021 at 12:35 pm GMT. Please note: Past performance is not a reliable indicator of future results.
Through the MetaTrader 5 trading platform, you can also input stop loss and take profit levels to help with risk management which is a key component to long-term trading. Trading indices via CFDs tends to be popular with short-term day traders and medium-term swing traders.
These types of traders would use other technical indicators to help find turning points in the market to trade on. However, due to some huge advances in technology, there is a new cutting edge feature provided by Admirals that finds actionable trading ideas for you.
Welcome to the Premium Analytics feature!
When you’ve logged in to your Dashboard (the web page where you manage all of your live and demo trading accounts, deposits and withdrawals, etc), you can access the Premium Analytics feature from the left tab. In this area, you can view the Technical Insight Lookup Indicator.
This indicator allows you to search thousands of different markets and will provide you with actionable trading ideas!
Source: Admirals Premium Analytics, 6 April 2021
The above screenshot shows all the technical events the indicator has found for French company Renault’s stock price. The indicator has found 20 different technical events on the car maker’s stock price which is categorised into short-term, intermediate-term and long-term.
The technical events represent significant points in time from a variety of different technical trading indicators. For example, the first few show events happening on the Commodity Channel Index (CCI), Moving Average Convergence Divergence (MACD), Williams %R and others.
It also provides a detailed explanation of the technical event, why it’s happening and why it’s important. This is not only useful to use in combination with your own analysis but also to learn more about the different technical indicators used by traders and investors.
Access this game-changing tool today and learn more by clicking on the banner below!
There are also other types of CAC 40 indexes, such as the CAC 40 Dividend Index, the CAC 40 Volatility Index, the CAC 40 Governance Index, the CAC 40 Short GR Index, among others. Each one would be used by different investors for different purposes.
Long-term investors also choose to use an exchange traded fund (ETF) which tracks the underlying CAC 40 Index. The fund provider creates and manages the ETF to provide investors exposure to the index. In this way, investors can buy and sell shares in the fund like a stock of a company.
For example, the Lyxor CAC 40 DR UCITS ETF - which is shown below - is available to trade on via CFDs, as well as invest in via the Invest.MT5 account.
Source: Admirals MetaTrader 5, #CAC, Monthly - Data range: from 1 Nov 2005 to 6 Apr 2021, accessed on 6 Apr 2021 at 12:45 pm GMT. Please note: Past performance is not a reliable indicator of future results.
With many analysts bullish regarding the long-term prospects of the CAC 40 index, having access to the right trading products is essential.
With Admirals, you can access a variety of different types of accounts to help navigate the price movement from the index and its constituents.
One of the best ways to get started is by opening a FREE demo trading account. This allows you to test all the services and features provided by Admirals in a virtual environment! When you are ready, you can then go live!
Get started today with a FREE demo account by clicking on the banner below:
Admirals is a multi-award winning, globally regulated Forex and CFD broker, offering trading on over 8,000 financial instruments via the world's most popular trading platforms: MetaTrader 4 and MetaTrader 5. Start trading today!
This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.
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