All major stock markets have their own index, and sometimes multiple indices. An index reflects the value of a defined basket of shares, such as the S&P 500 which reflects the stock prices of 500 large US companies. Because they are not at the mercy of a single company or market sector, they are seen to possess stability – safety in numbers effectively.
A good example of this is Wall Street’s NASDAQ index and its basket of tech companies. It includes the big names such as Microsoft, Google and Apple amongst others. Many are competitors and frequently one stock rises as a competitor’s goes into decline, giving a balancing effect and keeping the index stable.
The value of each stock in the index is weighted according to the company’s market cap. It means that stock price fluctuations of bigger companies have a greater impact on the index’s value than smaller companies do. So if, say, Google’s stock value rose markedly, it could raise the value of the index.
At Metadoro you can trade indices using CFDs. This is because CFDs themselves are not assets in which one could invest but only reflect price movements in the underlying asset. They enable traders to Buy (go long) or Sell (go short) and take advantage of leverage for opening trade positions.