Stock index
A stock index is a number that tracks the combined price of a group of stocks, such as the 500 largest US companies. It is used to judge how the market is doing as a whole.
How it works
An index is calculated from the prices of its stocks using set rules. Most major indices, like the S&P 500 and Nasdaq 100, are weighted by market cap: the bigger the company, the more it moves the index. Some are price-weighted, where weight depends on the share price; the Dow Jones and Nikkei 225 work this way.
You cannot buy an index itself, it is just a number. It is traded through funds (ETFs), futures or broker CFDs. On forex platforms indices usually have short names like US500, NAS100, GER40 or JP225, which vary by broker.
Indices are sensitive to central bank rates, company earnings and overall risk appetite. In recent years US indices, especially the tech-heavy Nasdaq, have often moved in the same direction as crypto.
You buy a US500 CFD at 5,000 points at $1 per point, stop at 4,950. Risk: 50 × $1 = $50. If the index rises to 5,100, you make $100, which is a 2% market gain.
A common mistake is believing an index always goes up in the long run and therefore trading it with leverage and no stop. A long-term uptrend does not stop indices from falling 20–30% or more, and with leverage that drop wipes out the account long before any recovery. Long-term investing is usually done without leverage through funds; trading needs a stop.
Questions and answers
What is a stock index in simple terms?
It is a single number showing how the prices of a group of stocks, like a country's biggest companies, change on average.
Can you buy the S&P 500 index?
Not the index itself, but you can buy a fund (ETF) that tracks it, or trade a future or CFD on it.
How are stock indices related to crypto?
When investors are in a risk-taking mood, both stocks and crypto tend to rise. In fear and high-rate periods they often fall together, though the link is not constant.
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Updated: 2026-10-19