There are many types of indices available to trade at spot price or through forward trading. Indices can be categorised by geographic location, industry sector, or company size. Some indices are categorised by the size of the companies they represent, such as the S&P SmallCap 600 and S&P Composite 1500. This helps provide investors with many trading opportunities. Businesses within an index must meet specific criteria. Companies within the S&P 500, for example, must have a certain market capitalisation.
Most major economies have a financial index. In the US there is the Dow Jones Industrial Average and NASDAQ, and also the Standard & Poor’s 500 index (S&P 500). Britain has the FTSE 100 index, while Germany has the DAX 30 index. France has the CAC 40. In Asia, there is the Hang Seng in Hong Kong, and Nikkei 225 in Japan. The ASX 200 index is traded in Australia. Learn how to trade the FTSE 100 index here.
Different stock exchanges deal with different types of stocks. Some only incorporate a particular industry. The NASDAQ index, for example, only lists technology stocks. There are other smaller indices which can be traded, depending on the trading platform a trader chooses to use. If a trader wanted to trade stocks online, there are no real barriers and many options to choose from.
Corporate actions of individual shares listed on an index can impact the overall value of an index, for example, mergers and the issuing of additional shares. Most large indices are recalculated on a quarterly basis and any constituent share that no longer meets the minimum criteria required to be on the index is dropped and replaced by another share that does.