Indices, alternatively also known as Indexes, can be defined as a statistical measure to evaluate the performance of a basket of stocks representing a particular market sector or section. For example, the “US S&P 500” is one of the most well-known indices which tracks the 500 largest companies (by market capitalization) listed on the US stock exchange.
Since an index is a number that reflects on the market or economic health, direct buying and selling are not possible. Instead, indices can be traded via index funds, index futures, options, ETFs (exchange-traded funds), or CFDs (contracts for difference). CFDs are an attractive option for traders as they are leveraged products, which means that profits can be booked on both the rise and fall in the index prices.