Stock market index's measure the performance of their relevant stock markets and there are a few index's you should be aware of in the UK and US markets.
FTSE 100
The FTSE 100 is an index comprised of the top 100 companies in the UK and stands for Financial Times Stock Exchange. The 100 companies are rated by how highly they capitalise the market. Capatalisation is measured by the (number of shares in issue X the share price).
The companies in FTSE 100 represent around 80% of the whole London Stock Exchange. this resulting in the FTSE 100 being a very accurate indicator of the UK market.
The FTSE 100 is a very strong indicator of the market and therefore it should always be taken into account when buying shares. If the FTSE 100 is down by e.g. 1% in the day then it is very likely that you shouldn't be buying shares and vica versa.
FTSE 250
The FTSE 250 is an index compromising of the top 250 companies outside of the FTSE 100 (Shares 101-350). Like the FTSE 100 the 250 companies are measured on market capitalisation.
The FTSE 100 and 250 together make the FTSE 350 index.
Shares in the FTSE 250 index are often more volatile than the FTSE 100 index due to their smaller market capitalisation. Therefore they can produce bigger profits and losses. Some shares in the FTSE 250 can be risky due to their low volume per trading day.
The Dow Jones Industrial Average (DJIA or DJ30)
The DJ30 (Dow Jones 30) is the US equivalent to the UK's FTSE 100 index and lists 30 of the biggest US industrial companies. The 30 companies in the DJ30 represent about 20% of all US stocks consequently providing an reasonable representation of which way the market is heading but a very accurate representation of the direction of US industrial stocks.
Well known stocks include McDonalds, Walmart and Walt Disney.
S&P 500
The Standard and Poor's 500, like the DJ30 is also an index. The index consists 500 of the most widely held blue chip stocks in the US. It is considered as the benchmark for the US stock market an is also important for blue chip traders to determine the overall performance of the big US companies.
NASDAQ 100
The NASDAQ stock exchange also provides its own index, the NASDAQ 100. Like the FTSE 100, the NASDAQ 100 lists the 100 most capitalised stocks in the NASDAQ stock exchange.
Stocks on the NASDAQ 100 are technology based stocks and include Apple, Microsoft and Yahoo.
Stocks listed on the NASDAQ are often slightly more volatile than other stocks, therefore they can enable you to make bigger profits or losses.
Note: If you want to trade indexs rather than individual stocks then check out ETF's (exchange traded funds).
