As the world’s financial markets have grown exponentially in value, they’ve also diversified to create a wider range of available asset classes for traders.
However, there remain a number of central and enduringly popular assets that underpin the financial markets, with indices trading offering a relevant case in point.
But what exactly are indices, and what are the most popular and heavily traded indices in the current marketplace?
What is Indices Trading?
The practice of indices trading requires investors to speculate on stock index price movements, as they look to profit from volatility and without assuming ownership of the underlying financial instruments.
Indices essentially track the performance of specific stock indexes, some of which cover specific industries and others that represent the most seminal companies in individual countries.
Because of this, indices can often be described as a key measurement of value within a particular section of the stock market, making it a viable standalone investment and one that can inform other trades over time.
Like individual stocks, indices price movements and volatility are impacted directly by political events and macroeconomic factors, which can be tracked in real-time and using basic trading platform resources.
What are the World’s Most Heavily Traded Indices?
We spoke earlier about the different types of indexes, but what exactly are the most traded indices in the global market? Here’s a selection of the most popular:
1. The FTSE 100
Let’s start with the FTSE 100, which is focused on London Stock Exchange-listed companies and features the 100 biggest firms in the UK by market cap value (hence its other moniker of the ‘UK 100’).
Unsurprisingly, there are 100 separate entities included within the index, which is focused on large-cap equities and boasted a total market capitalization value of £1.814 trillion as of May 2020.
Founded in 1984, the FTSE 100 includes household names across a broad range of sectors, including Barclays, Experian, HSBC, and the Vodafone Group.
2. The DAX (Germany 40)
Next up is a similar index in the form of the Germany 40 (or DAX), which comprises the 40 largest companies in Europe’s most prosperous nation.
Like the FTSE 100, the DAX uses market cap valuations to determine its listings, while the index remains incredibly popular thanks to the historically strong performance of its equities on the Frankfurt Stock Exchange.
This index was founded and launched in 1988, with popular and renowned companies such as Adidas, Allianz, and BMW all listed on the DAX.
3. The NASDAQ 100
The NASDAQ 100 is slightly different, as while it’s a market-cap-weighted index, it focuses on the leading technology companies in the US. As a result of this core industry focus, it’s also commonly referred to as the ‘US Tech 100’, with this entity having been launched back in 1971.
As the name suggests, this index features 100 major US tech firms, with its biggest listings including Apple, Tesla, Intel, Adobe, and Netflix. According to the recent figures, the NASDAQ 100 boasted a cumulative market cap of around $15 trillion at the end of 2020, with the share value of tech firms disproportionately larger than their respective earnings.
