<iframe src="//www.googletagmanager.com/ns.html?l=en-GB&wl=ETX&id=GTM-K79WJF" height="0" width="0" style="display:none;visibility:hidden"></iframe>

What are Indices


In its most common format, an index is a grouping of shares representing a particular sector of the market or the market in general.


For example, the Dow Jones Industrial Average (DJIA), a US-based stock exchange, is one of of the most widely monitored global indexes. The DJIA lists shares from the 30 highest performing US-based companies and represents approximately 25% of the US market. Meanwhile, the S&P 500, also a US-based stock exchange, is made up of the 500 most widely traded shares in the US (currently 502, due to company dividends), and represents approximately 70% of the US stock markets’ overall value.


An index’s value is described by a number of points. Each index is calculated slightly differently, but is generally a weighted average of its component shares. The changing value of an index over time mirrors the fluctuating values of its constituent shares.


To try and make a profit, traders will ‘buy’ an index if they believe its component shares will, on average, increase in value. Traders then aim to ‘sell’ that index for a profit at a later date if it does indeed increase in value. Traders can also make a profit by ‘selling’ an index they believe is likely to fall in value, with the intention of ‘buying’ it back for a lower price at a later date. However, the opposite is also true, and traders may find themselves making a loss if the index they have taken a position on does not appreciate or depreciate in the manner that they expected it to.

Understanding an Index’s Component Companies

​Understanding an Index’s Component Companies

Major_Financial

Understanding an Index’s Component Companies

If you’re thinking of trading on an index, it’s worthwhile taking the time to look at the component stocks of that index.


Learning about the companies that make up the index you are trading can help you in analysing that index and making educated predictions when you start trading. Different indices focus on different kinds of shares and market sectors, and keeping track of the movements of indices over time can also teach you about investors’ attitudes towards a range of companies and industries.


Some widely traded indices include:


- The S&P 500 and Dow Jones (New York City)
- The FTSE100 (London)
- The DAX30 (Frankfurt)
- The Shanghai Composite
- The Hang Seng (Hong Kong)
- The Nikkei 225 (Tokyo)


Trading Indices with ETX Capital

Trading Indices with ETX Capital

ETX TraderPro enables you to trade on over 20 major indices. ETX Capital also offers other platforms, specifically ETX Binary and ETX MT4, in which you can employ a range of trading techniques to suit your trading style and objectives. You can open an account with ETX Capital here. For more on how to trade indices, we recommend reading: How to Trade on Indices and Index Trading Strategies.

Apply for our

Apply for our