Equities · Indices
Stock Indices
A stock index tracks the combined performance of a group of shares. This guide explains how major indices are built, how they are quoted and traded, and what tends to move them.
Updated · FXPIPS Editorial Desk · Educational content, not investment advice
Data
Index level data
Index values belong to their providers and require a licence to display, so we link to the official publishers.
Drivers
What moves stock indices
01
Earnings of large constituents
In weighted indices, the biggest companies have the most influence, so their results and outlooks can move the whole index.
02
Interest rate expectations
Changes in expected central bank policy affect borrowing costs and how investors value future profits.
03
Economic data
Growth, employment and inflation figures shape expectations for company revenues and for policy decisions.
04
Risk sentiment
Shifts in investors' appetite for risk can lift or weigh on broad equity markets regardless of individual company news.
05
Currency movements
For indices full of exporters, a weaker home currency can boost overseas earnings when converted back, and a stronger one can reduce them.
What an index is
A stock index is a single number that summarizes the prices of a selected group of shares. It is a statistic, not something you can own directly. Investors use indices as benchmarks, and traders gain exposure to them through futures, exchange-traded funds and CFDs.
How indices are calculated
The rules for choosing and weighting members differ by index.
- Market capitalization weighted: each company's influence depends on its market value, usually adjusted for the shares actually available to trade (free float). The S&P 500, Nasdaq-100, FTSE 100 and DAX use this approach, with their own rules and caps.
- Price weighted: each company's influence depends on its share price, not its size. The Dow Jones Industrial Average and the Nikkei 225 are well-known examples.
Some indices are price-return (they ignore dividends), while others, such as the DAX, are total-return (performance) indices that assume dividends are reinvested.
Major indices
| Index | Market | Members | Weighting |
|---|---|---|---|
| S&P 500 | United States | About 500 large US companies | Float-adjusted market cap |
| Dow Jones Industrial Average | United States | 30 large US companies | Price |
| Nasdaq-100 | United States | About 100 large non-financial Nasdaq-listed companies | Modified market cap |
| FTSE 100 | United Kingdom | About 100 large LSE-listed companies | Float-adjusted market cap |
| DAX | Germany | 40 large German companies | Float-adjusted market cap |
| Nikkei 225 | Japan | 225 Tokyo-listed companies | Price |
How indices are quoted and traded
Index levels are quoted in points. Products that track them convert points into money using a value per point.
- Futures on major indices trade on exchanges such as CME Group and Eurex, often for most of the day on weekdays. Each contract has a fixed multiplier and expiry date.
- CFDs and spread bets from retail brokers typically let you choose a value per point, such as $1 or $10 per point, and may be based on the cash index or on futures prices.
- ETFs track an index and trade like shares during exchange hours.
The underlying cash index only updates while its exchange is open. Brokers may quote prices outside those hours based on futures, so you can see moves before the cash market opens.
A worked example
Illustrative example: you buy an index CFD at 5,000.0 with a value of $2 per point. The index rises to 5,060.0.
Profit = (5,060.0 − 5,000.0) × $2 = 60 × $2 = $120
Had it fallen to 4,950.0, the loss would be 50 × $2 = $100.
To size a trade so that a stop-out costs a set amount, divide your risk by the stop distance in points. With $100 at risk and a 40-point stop, the value per point would be 100 ÷ 40 = $2.50. The Position Size Calculator applies the same logic.
Indices and forex
Equity indices are often treated as a gauge of risk appetite. Some currency traders watch them for clues about sentiment, since the same economic and central bank news can move both. The relationship varies over time and between currencies, so treat it as context rather than a signal. See Currency correlation and our Stock Market page.
Risks
- Concentration: in cap-weighted indices, a handful of large companies can dominate performance.
- Gaps at the cash market open after overnight news.
- Leverage in futures and CFDs magnifies gains and losses; read What is leverage?.
- Financing costs on leveraged positions held overnight.
Index trading carries a substantial risk of loss. This page is educational and not investment advice.
This page is for education only and is not a recommendation to buy or sell any instrument. Leveraged products such as CFDs and futures can lose you more than you expect; check your broker's contract specifications and your local regulations.