Stock indices are sampling or collection of stocks that gives an overview of how a specific part of the stock market is performing. The indices move with the overall performance of the stocks that it holds within it. These indices can be used by investors who want to quickly gauge the performance of technology stocks, either at that moment or over time.
However, stock indices cannot be traded directly. Instead, they exist for informational purposes only. Market data is available for the stock indices, and they can be charted like any other stock, but there is no way to make either a long or short trade on the actual stock indices themselves. That’s where other financial products come in, like futures and CFDs contracts, which can be used to trade the movements of stock indices.
There are three types of indices, including global, regional, and national. Global trading indices include companies traded everywhere around the world, while regional indices provide information about companies from specific regions. National indices make it possible to learn more about the financial standing of particular country companies. Professionals use indices to identify an overall market trend. Some analysts can take advantage of this information, enabling them to indicate the country’s economic conditions.