Index, stock market index


    What is an Index?

    Indices are a method of measuring the value of a market segment. The best-known indices measure the performance of stock markets. An index is a mathematical construct, so you cannot invest in it directly. However, there are index funds that attempt to resemble the development of indices.

    Some important stock market indices:

    Index Follows
    Dow Jones Industrial Index 30 major US companies
    S&P 500 500 major US companies
    DAX 30 major German companies
    Nikkei 225 Most important Japanese index
    Hang Seng Index Index of the Hong Kong stock exchange

    Types of indices

    In a market-value weighted or capitalisation-weighted index such as the Hang Seng Index, the size of the companies are factored in. Here, a large change in the price of the largest component of the index can result in a relatively large change of the index value.

    In a price-weighted index such as the Dow Jones Industrial Average, the price of each component stock determines the value of the index. Here, the price movement of even a small single company can strongly influence the index.

    Trading stock market indices

    Trading index funds work on the same underlying principles as trading stocks. Here at tradimo, we will add plenty of lessons on stocks trading in the future. Technical analysis can also be applied to trading index funds: