Definition of Blue Chips

By Blue Chips, we mean those shares that boast the greatest capitalization and that are part of the stock market indices (DAX30, FTSEMIB, Dow Jones).

Normally these are shares of companies that are widely known and representative of a sector.

For example, in Italy, the shares of Banca Intesa are considered Blue Chips.

The term Blue Chips has its roots in the game of poker where they represent the highest value chips of all.

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Characteristics of the Blue Chips

In regulated markets, Blue Chips are those that offer greater liquidity and show higher trading volumes than ordinary shares.

Generally, we tend to consider Blue Chips as a form of a safe investment, protected from sharp depreciation, and are expected to guarantee certain and continuous dividends.

We can say that this is only partially true; if we refer to securities in the banking and insurance sector (barring exceptional events) we note substantial price stability.

However, if we analyze Blue Chips stocks in the technology sector, we can see the presence of very strong trends and high price variability.

The chart below shows Microsoft’s value; the value of the shares has almost doubled in two years.

The ATR indicator shows strong volatility of the prices.

Andamento MSFT da Ottobre 2017 a Dicembre 2019 (Fonte Ava Meta Trader)

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The Blue Chip segment of Borsa Italiana

With reference to the Italian stock market, the companies organized in a structured and solid way and with a capitalization greater than 1 billion euro belonged to the so-called Blue Chip segment.

The Blue Chip segment of Borsa Italiana was then divided into:

  • FTSE MIB (or Large Cap)
  • FTSE Italia Mid Cap

The FTSE MIB (a term that derives from Financial Times Stock Exchange Milan Stock Exchange Index) is the most important stock index of the Italian Stock Exchange.

It is a basket that conceptually incorporates, except in some cases, the shares of the 40 Italian companies that have greater capitalization, liquidity, and therefore also free float, although in some cases they may have their own registered office abroad; the companies belonging to the FTSE MIB incorporate more than 80% of the capitalization of the entire Italian stock market and about 90% of the value of the transactions on the Italian stock exchange markets.

The FTSE Italia Mid Cap is an index of the stock exchange that groups the quotes of Italian companies that previously belonged to the Blue Chip sector of the MTA and MTAX (formerly Nuovo Mercato) and which were therefore not included in the S&P Mib index.

This index was born on December 31, 1994, and was first called Midex with a value of 10,000.

As a result of the merger between Borsa Italiana and the London Stock Exchange, it has been renamed to today’s FTSE Italia Mid Cap index.

The FTSE Italia Mid Cap groups the top 60 companies by capitalization that are not included in the FTSE MIB index and its members are updated on a quarterly basis.

Together with the other FTSE MIB and FTSE Italia Small Cap indices, they constitute an overall FTSE Italia All-Share index.

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Top 10 Blue Chips in the United States

In the US market, every public company with a capitalization greater than 10 billion dollars is considered a company with a high capitalization share.

Normally these companies are the companies that drive the markets and within them, the primary brands are represented and are defined as Blue Chips.

Below is a list of the top 10 Blue Chips in the United States.

Below is a list of the top 10 Blue Chips in the United States

AvaTrade through its desktop trading platforms, online, and through its apps, allows you to trade on the blue chips of the main countries in the world.

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As always, before investing, make sure you understand and internalize the conditions of your broker.

Each lot of the platform corresponds to a certain number of shares, so pay attention to the conditions offered.

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