Indices are summary indicators that characterize the dynamic fluctuations in the value of financial instruments. Using these indicators, you can make a forecast of changes in the value of assets in the future. One of the main points during the study of the index is what financial instrument is the basic one for the index. The index includes, for example, several stocks simultaneously. The cost of the index is determined from the total value of securities or capitalization of issuers. A group of shares included in the index determines what information about the current state of the market can be obtained by analyzing it.

Robot work
Robot work

Stock indices are represented in large numbers, but there are 2 main types:

  • Industry (Consist of companies that belong to the same industry. Thus, they act as a specific indicator that displays the state of affairs in the industry as a whole.)
  • Composite (Includes companies that may belong to different industries. They help to reflect the state of the economy as a whole)

Advantages of Stock Index Trading

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  • Increased liquidity

  • Hedging Market Risks