Why to Trade Indexes?

Many professional and retails traders already know the main reasons of why index trading is so popular and why more and more new traders are coming into index trading. The few of the are

• Less Capital Investment: To get good performance from an index, you won't need to purchase a mutual fund or an assemblage of stocks. As easily, as a stock, with low commissions, and no worry about the load, you can buy the index directly!
• Less Volatility: As the indexes are an "average" of many stocks, by their nature they are much less volatile than the stocks they represent. Hence there is no need to worry about the news and fluctuations of many individual stocks.
• Many Derivatives: You not only get the ability to trade index share (SPDRs, QQQ, Diamonds, IWM, XLF and etc) but you can also trade options on indexes and index futures. Index options and futures are not as volatile as options and futures on an individual stock, because indexes carry a smaller risk and of course a smaller potential gain.

When it comes to the trading indexes, the Nasdaq 100, S&P 500, DJI and Russell 2000 indexes are fin the list of the most popular investment vehicle.

NASDAQ 100 Index

A basket of 100 of the largest domestic and international non-financial companies listed on the NASDAQ stock exchange is the NASDAQ-100. The companies' weights in the index are based on their market capitalization, with certain rules capping the influence of the largest components because it is a modified market value-weighted index. It includes companies and does not contain financial companies.

S&P 500 Index

An index containing the stocks of 500 Large-Cap corporations is the S&P 500. In the index, all of the stocks are those of large publicly help companies and trade on the two largest US stock markets, the New York Stock Exchange and NASDAQ. The S&P 500 is the most widely watched index, after the Dow Jones Industrial Average.

DJI Index

One of the several stock market indices created by the nineteenth century Wall Street Journal editor and Dow Jones & Company co-founder Charles Dow, is the Dow Jones Industrial Average (DJI, also called DJIA, Dow 30, or informally the Dow Jones or The Dow). To gauge performance of the industrial component of America's stock markets, Dow was compiled. Aside from the Dow Jones Transportation Average, which Dow also created, it is the oldest continuing U.S. market index.

Russell Indexes

The main index which is divided into several sub-indexes, including the well-known small-cap Russell 2000 Index, is the Russell 3000 Index which is the main U.S. index. Compiled by the Tacoma, Washington-based Russell Investment Group, is the list of stocks in the Russell 3000. The top 3,000 stocks in the United States, (those of the 3,000 largest companies) make up the broad-maker Russell 3000 Index. What makes up the large-cap Russell 1000 Index is the top 1,000 of those companies and, what makes up the small-cap Russell 2000 Index, is the bottom 2,000 (the smallest companies).