Stock Indices

Indices track a basket of stocks, giving you broad market exposure without picking individual companies. Trade the market direction, not single stocks.

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What Are Indices?

An index is a weighted collection of stocks representing a market segment:

• S&P 500 — 500 largest US companies
• NASDAQ-100 — 100 largest tech/growth stocks
• Dow Jones — 30 major US companies
• Russell 2000 — 2000 small caps

Why trade indices? You get diversified market exposure in one trade.

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Market Characteristics

Size and Volume

Feature	Value
S&P 500 Volume	$100B+ daily
NASDAQ-100 Volume	$50B+ daily
Tick Size	0.01 points
Multipliers	1x (SPY), 20x (ES)

Trading Hours

US Index Futures Hours (ET)
━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━
Pre-Market    █████████         18:00-09:30
Regular       █████████████████  09:30-16:00
Extended      █████████         16:00-20:00

• Futures: Nearly 24 hours
• ETFs: Market hours
• Closed weekends

Leverage

• ETFs: 1-2x (SPY, QQQ)
• Futures: 20x (ES), 50x (NQ)
• Micro: 1x (MES), 0.5x (MNQ)

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Volatility Profile

Typical Movement

Index	Daily Range %
S&P 500	0.5-1.5%
NASDAQ	0.8-2%
Russell 2000	1-2.5%

Volatility Characteristics

• Lower volatility — Diversified basket
• Gap risk — Overnight news
• Trend continuity — Upward bias long-term
• Sector-weighted — Tech-heavy indices move more

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Best Strategies for Indices

1. Trend Following

Why it works: Long-term upward bias

Setup	Timeframe	Stop
50/200 MA cross	Daily	2% trail
New high breakout	Daily	Below breakout

2. Mean Reversion

Why it works: Indices revert to averages

Setup	Timeframe	Target
-2% from daily high	15-min	MA bounce

3. Gap Trading

Why it works: Gaps fill more than single stocks

Setup	Timeframe	Strategy
Gap open	15-min	Fade or ride

4. Support/Resistance

Why it works: Key levels = key reactions

Setup	Timeframe	Entry
Daily support bounce	1-Hour	Bounce

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Popular Indices

US Indices

Index	Ticker	Focus	Weighting
S&P 500	SPY, ES	Large cap	Market cap
NASDAQ-100	QQQ, NQ	Tech/growth	Market cap
Dow Jones	DIA	30 leaders	Price-weighted
Russell 2000	IWM	Small caps	Market cap

International

Index	Country	Ticker
FTSE 100	UK	UKX
DAX	Germany	DAX
Nikkei	Japan	NKY
Dax	Euro	STOXX50E

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Trading Tips

Do

• Trade the trend (indices have upward bias)
• Use futures for leverage
• Trade liquid contracts (ES, NQ)
• Set hard stops

Don’t

• Fight the trend long-term
• Over-leverage (20x+ is dangerous)
• Trade thin contracts
• Ignore macro events

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Index Products

ETFs (Long-term)

ETF	Index	Expense Ratio
SPY	S&P 500	0.09%
QQQ	NASDAQ-100	0.20%
IWM	Russell 2000	0.19%
VWO	Emerging markets	0.08%

Futures (Trading)

Contract	Index	Tick Size	Value/Tick
ES	S&P 500	0.25	$12.50
NQ	NASDAQ-100	0.25	$5.00
YM	Dow Jones	1	$5.00
RTY	Russell 2000	0.10	$50

Options

Product	Use
SPY options	Hedging, income
Index options	Speculation
Weekly expiries	High gamma

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Key Takeaways

1. Diversified exposure — One trade = many stocks
2. Lower volatility — More stable than single stocks
3. Trend-friendly — Long-term upward bias
4. Leverage via futures — High exposure, low capital
5. Well-regulated — Protected exchanges

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Next Market

Now that you understand Indices:

commodities.md >>>

Trade the market, not just stocks.