Indices

Indices

An index is an indicator or measure of something, and in finance, it typically refers to a statistical measure of change in a securities market. In the case of financial markets, stock, and bond market indices consist of a hypothetical portfolio of securities representing a particular market or a segment of it. (You cannot invest directly in an index.) The S&P 500 and the US Aggregate Bond Index are common benchmarks for the American stock and bond markets, respectively. In reference to mortgages, it refers to a benchmark interest rate created by a third party.

Each index related to the stock and bond markets has its own calculation methodology. In most cases, the relative change of an index is more important than the actual numeric value representing the index. For example, if the Financial Times Stock Exchange (FTSE) 100 is at 6,670.40, that number tells investors the index is nearly seven times its base level of 1,000. However, to assess how the index has changed from the previous day, investors must look at the amount the index has fallen, often expressed as a percentage.

CFD Indices

One of the easiest and most popular ways to trade indices is with CFDs (contracts for difference). A contract for difference (CFD) is a type of contract between a trader and a broker in order to try and profit from the price difference between opening and closing the trade.

Using CFDs to trade indices will allow you to go long or short the market without having to deal with conventional exchanges. You trade direct with your CFD broker. No matter whether you have a positive or negative view of the index forecast and predictions, you can try to profit from either the upward or downward future price movements.

Some of the most heavily traded live Indices markets include:

  • The FTSE 100 – Sometimes called the ‘UK 100,’ this represents the UK’s hundred biggest companies by market capital
  • Dow Jones – Often referred to as simply ‘Wall Street’ this comprises 30 of the US’ biggest publicly owned companies
  • The DAX – Referred to as the ‘Germany 30,’ this index is made up of 30 major German companies
  • NASDAQ 100 –The ‘US Tech 100,’ is a capitalization-weighted index made up of over 100 tech companies in the US
  • Nikkei 225 – Japan’s biggest price-weighted index is comprised of 225 of the country’s biggest companies
  • CAC 40 – Simply referred to as the France 40 this comprises 40 of France’s biggest companies by capitalization

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Indices

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