They represent a portfolio of stocks representing a particular market or market sector. Normally, most economies either developed or developing have at least one financial index. The value of an index in term of a number of points. Every index’s value represents the weighted average of the current values of its component stocks, even though they are calculated in a slightly different way.
The indices are used as an indicator of the current state of an economy or a particular industry. For example, Dow Jones Industrial Average (DJIA) – one of the most frequently used indices worldwide. The index is represented by 30 of the largest companies in the U.S. comprising about 20-30% of the U.S. market. On the other hand, S&P500 represents the top 500 most traded companies in the U.S. representing approximately 70% of the U.S. market. Thus, the chaining value of an index on day to day basis reflects the fluctuating values of the individual stocks within it.
Some widely traded indices include:
Monitoring indices and tracking their movements help traders to draw a sample overview of a country’s economic state or an industry state, along with the use of technical and fundamental analysis.
Due to the fact that Indices are not a financial asset in which can be invested directly, thus on Fibonetix indices can be traded as CFDs.
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