An index is a way of standardizing and tracking the performance of a collection of assets or securities.
Indices are also used as a benchmark to assess the general performance of other economic data, like inflation or interest rates.
Popular indices in the financial market include the Dow Jones, which tracks 30 of the largest companies listed on the stock exchange in the US. Other top-traded indices from the US include the S&P500 and the NASDAQ.
Indices for many other large markets are also highly traded, including the FTSE (UK) and the DAX (Germany).
Indices Trading Example
Buying US30 (Dow Jones)
Opening the Position
Opening price USD $ 31250.50
You decide to buy 1 contract at $ 31250.50 (1 contract=1$ per index point)
Closing the Position
One week later the US30 has risen to 32250.50, you decide to take your profit by closing your buying position
Market movement= 32250.50 – 31250.50 = 1000
Gross profit on Trade = 32250.50 – 31250.50*1= USD $ 1,000($1 per Index point)