Indices (alternatively known as ‘indexes’) are assets organized together in order to represent a specific sector of a market, or the market as a whole. The level of an index is worked out by considering the prices of the various assets making up the index; as a result, movement in individual stock prices can result in the value of the index as a whole increasing or decreasing.
The majority of the world’s most important economies - as well as many developing economies - have at least one financial index, grouping together a number of assets. Examples of major indexes include the following:
DAX30 - Frankfurt
Dow Jones - New York
FTSE100 - London
Hang Seng - Hong Kong
Nikkei 225 - Tokyo
S&P 500 - New York
Shanghai Composite – Shanghai
Different indices focus upon varying forms of shares. Some are global-based - the S&P Global 100 is an obvious example - while others focus on one specific country, only listing stocks from companies based in that jurisdiction. There are also indices which are focused upon specific industries - the NASDAQ is purely for stocks listed by technology companies.
Some multi-national companies are available to trade on more than one index, often appearing on national and international indices. So, for example, Credit Suisse is listed on the Swiss Market Index in Zurich as well as the New York Stock Exchange.
In addition, there are some indices which are available in both ‘Rolling Daily’ or ‘Futures’ formats, which means they can be traded at their current value, or at a price set at this point in time on an option which will close on a specific date in the future.
Whilst one can certainly trade stocks in individual companies, one can also trade an index as an individual unit. Traders are likely to purchase if they believe that the stocks comprising the index will see an average increase in value in the near future. By contrast, if they suspect that the stocks making up the index will see a general decline soon, they will sell.
At Forex College you will learn how to trade a large number of indices, with 20 different indices waiting for you on our MT5 platform.
We will assist you to open a trading account in ZAR at our brokerage that will allow you to trade all assets in our Pro Forex Trading Course.