Equity indices are one of the most popular investment products with investors, offering a cost effective and straightforward way to gain exposure to equity markets across Europe, Asia and North America.
These contracts reflect the performance of the stock market of a country, and as such are an indicator of investor sentiment on the economy as a whole. The largest and most heavily traded equity indices include DOW (United States), FTSE (United Kingdom), Nikkei (Japan), and Hang Seng (Hong Kong).
The composition and weighting of the different national stock market indices varies, meaning that some are more dramatically influenced by price movements in individual stocks than others. Each index also shows a notably different sector tendency, meaning that trading multiple indices can offer wide industrial sector diversification as well as diversification across national economies.
Investors prefer to trade indices rather than individual companies as they give a broad view of the economy and can gain exposure to a range of Equity Market Indices. Indices track the price changes of leading equity markets.