NYSE FANG+ Index Trading Guide: How to Trade the NYSE FANG+

Following 10 of the most traded tech-related American shares (as of June 2024), the NYSE FANG+ (FNG) is a popular index for those interested in getting exposure to big tech stocks traded on Wall Street.

This Plus500 guide dives into the NYSE FANG+. It explores what the index represents, the factors that move its value, why some traders are drawn to it, its potential drawbacks, and finally, how you can trade it on the Plus500 platform.

TL;DR

• NYSE FANG+ stands for New York Stock Exchange Facebook (Meta), Amazon, Netflix, and Google (Alphabet) and more.
• This index is an equal-weighted index that was launched on September 27, 2017, with a base date of September 19, 2014.
• The NYSE FANG+ Index provides a way for traders to track and potentially trade 10 of the biggest names in the US technology, media & communications and consumer discretionary industry, including Alphabet (Google), Amazon, Apple, Broadcom Inc, Meta (Facebook), Microsoft, Netflix, Nvidia, Snowflake, and Tesla (as of June 2024).
• The index is rebalanced four times yearly, on the last Friday of March, June, September, and December.
• The NYSE FANG+ index delivered a strong annualised total return of 28.42% from September 19, 2014, to June 30, 2024. This significantly outpaced the performance of the NASDAQ-100 (18.58%) and the S&P 500 (12.82%) over the same period.
• Economic conditions, trends in the tech sector, regulation, monetary policy, corporate performance, and unexpected events are the main price drivers of the NYSE FANG+ index.
• The NYSE FANG+ can be traded through Contracts For Difference (CFDs) with various popular trading strategies like day trading, swing trading and position trading.

Understanding the NYSE FANG+ Index

What Is the NYSE FANG+ Index?

The NYSE FANG+ is the New York Stock Exchange Facebook (Meta), Amazon, Netflix, and Google (Alphabet) and additional companies index. It tracks 10 leading US tech and tech-related companies, offering traders a way to gain exposure to this high-growth sector with a single financial vehicle.

Who Are the Components of the NYSE FANG+ Index?

As of June 2024, the 10 constituents of this sector index are the following stocks:

1. Amazon (AMZN)
2. Apple (AAPL)
3. Broadcom Inc. (AVGO)
4. Alphabet (GOOG)
5. Meta (META)
6. Microsoft (MSFT)
7. Netflix (NFLX)
8. NVIDIA (NVDA)
9. Snowflake (SNOW)
10. Tesla (TSLA)

What Are the NYSE FANG+ Index Trading Hours?

On the ICE exchange, the NYSE FANG+ index futures contract starts trading on Sunday evenings in the US at 6:00 PM ET and runs until 6:00 PM ET the following day. However, trading hours for the CFDs on the NYSE FANG+ index may differ on Plus500.

What Are the Potential Benefits of Trading the NYSE FANG+ Index?

As with other stock indices, such as the Germany 40 (FDAX) or the USA 30 (YM), or stock sector indices, such as the Cannabis Stock Index, or the Real Estate Giants Index, trading the NYSE FANG+ index can offer various advantages to traders:

• Trading Opportunities on the Tech Sector: As the NYSE FANG+ index tracks the top US tech giants and acts as a benchmark of this sector, it can offer a chance for traders to capitalise on the growth potential of this dynamic sector and participate in potential tech booms.
• Less Volatility: Indices generally experience lower market volatility compared to individual stocks because they represent a basket of companies, which tends to lead to smoother price movements and potentially lower risk. By trading in the NYSE FANG+ index, you're spreading your risk across 10 tech-related companies, potentially mitigating the impact of a single company's performance on your overall position.
• Diversification & Passive Trading: Instead of actively picking individual tech stocks and attempting to time the market, the NYSE FANG+ index offers a passive approach to trading. Because this index tracks 10 leading American technology companies, it provides a pre-built portfolio replicating a slice of the US tech sector. By trading the NYSE FANG+, you gain exposure to the collective performance of these companies without the need for constant stock selection or market timing.
• Equal Weighting: Unlike many traditional market-cap weighted indexes where the biggest companies hold the most sway, the NYSE FANG+ takes a different approach, using equal weighting (10%). It means that all 10 of its constituent companies have the same influence on the overall index value.
• Simplified Understanding and Analysis: Instead of diving into the financials of individual companies, indices allow you to focus on broader trends impacting a given geographic market or a specific industry as a whole. This will enable you to decide whether to buy or sell without getting bogged down in company-specific details. As an index, the NYSE FANG+ can simplify your analysis by offering a single point of reference for the American tech sector.
• Hedging: The NYSE FANG+ index can become a valuable hedging tool for those holding positions in the individual companies included in the index. By taking a short position on the NYSE FANG+ (the opposite of a long position), you can potentially offset losses coming from your individual tech stocks if the tech sector weakens. Think of it like an insurance policy for your tech holdings. If the tech sector falls, your short position on the NYSE FANG+ can help mitigate losses, even if some of your individual stocks underperform.

Is Trading the NYSE FANG+ Index Risky?

While indices like the NYSE FANG+ can offer opportunities, all markets carry inherent risks. Here is a list of some risks to consider if you want to get into NYSE FANG+ index trading:

• Concentration: The NYSE FANG+ offers exposure to the top 10 US tech companies, and this focus also presents a concentration risk. Since the index only tracks these 10 players, its performance is heavily tied to their individual successes and failures. Additionally, this concentration within the tech sector itself adds another layer of risk, as the entire sector's fortunes can fluctuate dramatically.
• Market Volatility: The tech sector is historically known for its high growth potential but also for its periods of high volatility. This means the price of the NYSE FANG+ index can fluctuate significantly, leading to potential losses for traders.
• High Valuation: While stock splits have made some tech company shares more accessible throughout the years, the sector is known for hefty price tags. This stems from a key factor: growth expectations. Tech companies are often valued based on their potential for above-average growth, which translates into higher valuations compared to other sectors.
• Regulation: The tech sector faces a growing wave of regulations worldwide, particularly in the US, Europe, and China. These regulations aim to address concerns over data privacy, competition, and national security, among others. New regulations can impact the profitability or growth prospects of companies within the NYSE FANG+, ultimately affecting the index value. Beyond regulations, geopolitical tensions can also heighten volatility. Antitrust laws and trade disputes can disrupt global supply chains and impact tech companies' ability to operate freely.

What Is the NYSE FANG+ Index CFD on Plus500?

On Plus500, the NYSE FANG+ (FNG) is the symbol of the Contract For Difference (CFD) on the NYSE FANG+ index futures prices. A CFD is a financial derivative that tracks the value of the underlying asset - in this case, the NYSE FANG+ index futures contract - offering traders a chance to trade in both falling and rising markets.

Like other types of CFDs, index CFDs allow traders to control a larger position than their trading account balance by using leverage, which can magnify potential profits but also potential losses. CFDs also allow a two-way trading type with shorting possible in addition to long positions during bull and bear markets.

In addition to the risk of loss due to leverage, you'll need to maintain a minimum margin in your account depending on the margin requirements of your CFD provider to hold a CFD position. This can tie up a portion of your trading capital. CFD trading also typically involves fees such as spreads and overnight rollover, which can eat into your profit or increase your losses, depending on your trading strategy.

What Can Move the Value of the NYSE FANG+ Index?

Let's take a look at some general market movers and some factors specific to the tech sector that can influence the index price:

• Performances of the Companies Within the NYSE FANG+ Index: The financial health of individual companies within an index directly impacts its overall value. Robust earnings reports can boost the index, while weak earnings can drag it down. With its flurry of company reports, earnings season offers valuable insights into these financial results.
• Monetary Policy in the United States: Higher interest rates from the FOMC can hurt companies in the NYSE FANG+ index in two ways, depending on their levels of cash and debts: increased borrowing costs and lower stock valuation. Conversely, lower interest rates with dovish monetary policy may be more favourable to tech stocks in the NYSE FANG+ index.
• Political Events & Geopolitical Tensions: Some political events and geopolitical tensions, such as significant elections, wars, and trade disputes, can strengthen or weaken the index.
• Economic Data: Many different economic indicators, such as the CPI, the GDP, the PCE, and the PMI, can influence the overall market.
• Trends in the Technology Industry: Because the NYSE FANG+ index includes companies belonging to the overall tech sector, any major challenges and trends, such as cloud, AI, and cybersecurity, can influence the value of the index.
• Regulations in the Tech Industry: The evolution of regulation to better protect businesses, consumers, and individuals from the adverse effects of Artificial Intelligence (AI) or social media platforms can impact the value of big tech stocks and the NYSE FANG+ index.
• Sub-Industry Evolution: Regulatory changes, challenges, and trends within specific sub-sectors can also impact the index. For example, regulations on online advertising can affect Amazon, while Netflix relies on online streaming dominance, and Snowflake on cloud computing growth.

How to Trade the NYSE FANG+ Index (Step-by-Step Guide)

Once you've learned the main trading terms and financial terms every trader should know about, as well as what the differences between trading and investing in the NYSE FANG+ are, you might want to consider the following steps before getting into NYSE FANG+ index trading:

1. Choose your trading style (day trading, swing trading, position trading).
2. Decide which trading strategies to adopt (economic data trading, range trading, trading support and resistance, trading with the scaling in or layering technique, and breakout trading).
3. Choose the right trading time frame.
4. Understand how to manage your risk when trading the NYSE FANG+.
5. Write your trading plan.
6. Capitalise on all your CFD provider's trading tools, such as trading alerts, the economic calendar and +Insights offered by Plus500.
7. Know about the common trading mistakes to avoid.
8. Learn how to control your emotions when trading.
9. Adopt the right trading mindset.

Now that you know what the NYSE FANG+ index is, what can influence its value, and how to trade the index if it fits your trader profile, why not start trading the NYSE FANG+ on Plus500?

NYSE FANG+ Index Trading — Frequently Asked Questions (FAQs):

What companies are in the NYSE FANG+ index?

As of June 2024, the index NYSE FANG+ gathers 10 highly-traded tech giant stocks, including Meta, Apple, Amazon, Netflix, Microsoft, Tesla, Google, Nvidia, Snowflake and Broadcom Inc.

How can I forecast the direction of the NYSE FANG+ index?

Forecasting the NYSE FANG+ index can be challenging, and past performance isn't a crystal ball. However, two main analysis methods can shed light on potential direction: technical analysis and fundamental analysis. The first technique focuses on price charts and historical movements of the index itself, using trading indicators and chart patterns to suggest potential trends. The second one examines the financial health of the index's underlying companies to provide potential buying or selling opportunities based on intrinsic value.

What can influence the value of the NYSE FANG+?

Various factors can influence the price of the index. Additionally, these price drivers can change over time. Still, some factors usually affect the price of a stock, such as corporate finances, economics, politics, and market sentiment.

The NYSE FANG+ index can also be influenced by interest rate levels and specifics of the sub-industries they belong to, such as social media for Meta, automotive for Tesla, and artificial intelligence and hardware for Nvidia, for instance.

How can I test my trading plan on the NYSE FANG+ with Plus500?

To practise trading as a beginner or test your trading plan on the NYSE FANG+ index with Plus500, you can open a demo trading account that will allow you to trade in real conditions with virtual funds.