An index is a measurement of performance of a selection of the stocks traded on a given exchange.
The value of the index is derived from the value of selected stocks given as an average or calculated using a given formula depending on the index and is used as an indicator of performance of a given economy or sector.
Some of the well known indices in the world markets include FTSE 100, the Dow Jones, the Dax 30, the S&P 500, and the Nikkei 225.
Indices give you the chance to trade on whether you think a given basket of selected stocks will go up or down without having to purchase the individual shares for this purposes.
Trading a basket of selected shares in any given index can help in reducing the risk that’s involved in trading individual stocks.
The price movement and volatility of indices is affected by factors such as economic data, company earnings reports, central bank policy and major political factors as well as unforeseen events.
Disclaimer – Futures, CFD, Margined Foreign Exchange trading, Warrants, Options and Spread Betting all carry a high level of risk to your capital. Only speculate with money you can afford to lose. Futures, CFD, Margined Foreign Exchange trading and Spread Betting may not be suitable for all customers, therefore ensure you fully understand the risks involved and seek independent financial advice if necessary.
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