Things You Need To Know About ASX200

The S & P / ASX 200 or ASX200 index is an Australian stock market index comprised of the top 200 companies listed on the Australian Stock Exchange.

These companies are of interest to investors. It is because the value of large companies is often considered less volatile. Some of the companies in the ASX 200 are also blue chips and are among the most traded Australian stocks on the market. They are ubiquitous in this sector as they boost financial strength and have an excellent track record.

Let’s move further to know about it in detail.

What Is ASX200?

ASX, or the Australian Securities Exchange, is a marketplace where the companies listed sell their shares to investors to raise funds. It helps them finance their business operations.

It tracks the shared price movements of the 200 substantial companies listed on the shares based on the market capitalization, an estimated value of the company calculated based on the number of shares on issues multiplied by the current trading price.

Importance of ASX200

The ASX 200 doesn't provide a complete picture of the stock market but gives a pretty solid approach. It is because the index represents approximately 80% of the total value of the Australian stock market. Therefore, it often serves as a good measure of the health of the broader Australian economy.

The ASX 200 also serves as a valuable benchmark against which you can compare the performance of individual stocks and your entire portfolio. Some funds may have the right to duplicate or exceed the performance of an index.

Investing in the index can also contribute to a diversified portfolio as it consists of a broad basket of liquid stocks regularly traded and representative of major Australian publicly traded companies.

Criteria To Get Involved in ASX200

If you want to get involved in this list, your company must fulfill some criteria. It should be listed as ordinary or preferred shares on the stock exchange. Preferred shares do not have any voting rights, unlike common shares. However, it has the advantage of a fixed dividend. Moreover, Hybrid stocks with equities and fixed income are not eligible for this criteria.

Large and high liquidity ASX companies can become part of the index. Contrarily, liquidity means the way a company’s share can be brought or sold on the stock exchange effortlessly. The regularity of trading these shares and their volume measures the liquidity.

ASX200 Trading Strategies and Tips

  • Select A Trading Style- You can select the trading style per your preference. It includes scalping, day trading, and swing trading. Ensure to choose what is suitable for you.
  • Study Charts and Price Actions- With the help of chart analysis, you can gauge previous market sentiments. On the other hand, the price assessment will help you evaluate the market's moves.
  • Conduct Your Own Technical Analysis- By technical analysis, we mean using indicators to determine patterns and trends on the price chart. Trading platforms contain multiple indicators to choose from.
  • Use ASX Trading Signals- ASX trading signals notifies you when specific conditions are fulfilled. For example, you acquire notification when there is a particular increase in the price of ASX200.
  • Follow The News- With the help of reports and breaking announcements about the economy and individual companies, you can make informed decisions. Professional traders focus more on the company’s earnings report and changes in the interest rates.


Now that you know what ASX200 is and it's trading strategies and tips, it's time to buy or sell shares. There are two ways to invest in ASX 200 stocks.

You can invest directly by trading shares of companies that are part of the ASX 200. You can also invest indirectly through exchange-traded funds (ETFs). There are many ETFs based on the ASX 200 index. ETFs are traded like common stock and can be purchased through a broker.

The ETF lets you buy the entire basket of ASX 200 shares instead of buying an individual company. It's a relatively inexpensive way to achieve index-like returns while building a diversified equity portfolio. However, ensure to consider the sector or market risks imposed by ETF.

If this sector declines, ETF’s value will fall as well.
Topic revision: r1 - 22 Sep 2022, EmmaDobie
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