Why trade indices?

Discover why traders around the world choose indices for their trading success.

Trading indices – The basics

With indices like DAX and Dow Jones making headlines every day in the financial world, what exactly are indices and how can traders benefit from adding them to their trades? Let’s start with the basics. An index, also known as a stock market index, is a measure of a group of companies and is used to evaluate the performance of a sector, region, or national economy.

The first index was created in 1885 by Charles Dow, editor of the Wall Street Journal and co-founder of Dow Jones & Company. Before the digital age, the price of an index was calculated using a simple average that added up the prices of its components divided by the number of companies.

Market-value-weighted vs. price-weighted indices

Market-value-weighted vs. price-weighted indices

Today indices use different formulas to determine their price, which can be divided into two main categories, which is key for traders to understand before evaluating the performance of an index.

1. Market-value-weighted indices
Market-weighted indices are calculated based on the total market value of its constituent companies. This means, the bigger the company, the larger the impact it has on the index. This is the most common methodology used by indices, with FTSE and DAX being classic examples.

2. Price-weighted indices
This type of indices are calculated based on its companies’ share price. In this case, constituent companies with higher share prices have a bigger impact on the overall index than companies with a lower price.

Top 9 Global Indices

Are You Ready To Trade Indices Live?

Now that you know the ins and outs of the world’s major indices, it’s time to learn

Major Indices Explained

     About Forex