Indices
What are indices?
Indices are the plural form of an index and before discussing different types of stock market indices, let’s have a look at what an “Index” is. It is a statistical indicator which shows changes in the economy. In terms of financial markets, an index can be explained as a portfolio of securities representing a particular market of a segment of the market.
In simpler terms, let’s say “A” is a set collection of 50 stocks having a large volume and traded every day; it is an index covering 50 stocks or in other words, these 50 stocks are used as an index and determine the movement of the market.
A stock index is an indicator of the overall performance of the marketplace or a single sector. It acts as a benchmark for portfolios performance. These portfolios belonging either to individuals or mutual funds use this index to measure for appraisal of their performance. Our recommendations are once you have selected one, spend some time researching the constituents with sectors that are in there, the type of market, the type of companies quoted there, the volatility of these firms, and news flows.
DAX, Dow-Jones, and FTSE are some of the magical words you observe every day on your television’s newsfeed. For investors, these are not mesmerizing anymore as any change in their value brings stress for them and brokers. These changes also impact policymakers to implement changes in their economies.
Indices definition and their role in the trading process
The technical indices definition can be summarized in simple words as “The exchanges shares separated into sub-sectors/industry wise.” This way anyone can have more than one way to trade a stock. This also means particular parts of the marketplace could be analyzed in terms of commercial or industry sector. For instance, a firm “Shell” is quoted as an individual stock on the stock exchange and also a member of the oil and gas index.
Indices reflect how all oil and gas shares quoted on the stock exchange have performed where oil and gas index itself is a part of the overall marketplace. This means when an investor is looking at his trading strategies and thinks how to buy the indices, he will have an overall view of the market along with how oil and gas are performing specifically. He may have a very strong view on the individual stock, say, Shell.
Indices definition and their role in the trading process
The technical indices definition can be summarized in simple words as “The exchanges shares separated into sub-sectors/industry wise.” This way anyone can have more than one way to trade a stock. This also means particular parts of the marketplace could be analyzed in terms of commercial or industry sector. For instance, a firm “Shell” is quoted as an individual stock on the stock exchange and also a member of the oil and gas index.
Indices reflect how all oil and gas shares quoted on the stock exchange have performed where oil and gas index itself is a part of the overall marketplace. This means when an investor is looking at his trading strategies and thinks how to buy the indices, he will have an overall view of the market along with how oil and gas are performing specifically. He may have a very strong view on the individual stock, say, Shell.
