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Forex is one of the cornerstones of the financial market.
Indices exist to represent specific market segments.
Indices show the performance of a specific group of stocks that considered to represent a specific sector or market.
Let’s say that you wish to know how the entire American stock market is doing, how would you check it?
it would be quite difficult to find every single traded company in the U.S, so we can take a smaller sample of the market (the biggest 500 companies) and create a statistic out of them. The sample that we just created can be called an index, which is a statistical measure of the changes in a portfolio of stocks. This sample represents a portion of the overall market.
There are indices for almost every sector of the economy and stock market. Many traders are familiar with US 500 and the DOW, these indices exist to represent specific market segments.
US 500 intended to represent a sample of the leading companies in a leading industry within the U.S. economy.
Index is an indicator that compose of several factors (depends what the indicator wishes to show), and is available to trade via CFD (you cannot invest directly in an index).
Indexing is broadly known in the investment industry as a passive investment strategy. The idea behind the passive investment strategy is the diversification of the portfolio. The general belief is that market sectors will keep prevailing, which means that the index will keep going up even if some companies will fail.
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