STOCKS · INDICES · Beginner · 7 min read · 3 Nov 2026 · Navion Pro Research
What Is a Stock Index, and Why Can a Few Companies Move It?
When the news says "the market rose today", it usually means a stock index rose. An index tracks a group of shares as one number. But not every share counts equally, and that can surprise new traders. This guide explains how indices work.
Trading leveraged products carries a high level of risk to your capital. Losses can exceed deposits. Past performance is not an indicator of future results.
Key Points
- A stock index tracks the combined value of a group of shares, such as the largest companies in a country.
- Most major indices are weighted by company size, so the biggest companies have the most influence.
- Some indices, such as the Dow and the Nikkei 225, are weighted by share price instead.
- When a few very large companies dominate an index, their moves can outweigh hundreds of smaller ones.
What a stock index is
A stock index is a measure of how a group of shares is doing. Its level goes up when the shares in it, taken together, rise in value, and down when they fall.
Indices give traders a quick read on a whole market or industry. They also let you trade a view on that whole market in one position, rather than buying many shares one by one.
Some major indices
| Index | What it tracks | How it is weighted |
|---|---|---|
| S&P 500 | 500 large US companies | By company size |
| Nasdaq 100 | 100 large companies listed on the Nasdaq exchange, many in technology | By company size |
| Dow Jones Industrial Average | 30 large US companies | By share price |
| DAX | 40 large German companies | By company size |
| FTSE 100 | 100 large companies listed in London | By company size |
| Nikkei 225 | 225 large Japanese companies | By share price |
How indices are weighted
By company size. Most major indices weight each company by its market value, which is its share price multiplied by the number of shares, often counting only shares that are freely traded. A company worth ten times as much as another has ten times the influence on the index.
By share price. A few older indices, such as the Dow, weight each company by its share price. A company with a $500 share has ten times the influence of one with a $50 share, whatever the size of either company.
| If an index is weighted by | Then a 10% rise in a company's shares |
|---|---|
| Company size | Moves the index more if the company is large |
| Share price | Moves the index more if the share price is high |
Why a few companies can move an index
In an index weighted by size, the largest companies can make up a big share of its value. When that happens, a strong day for a handful of giants can lift the whole index, even if most companies in it fall.
An example: three giants, seven smaller companies
This example is for illustration only. The index and its companies are made up.
An index holds 10 companies, weighted by size.
| Companies | Share of the index | Move on the day |
|---|---|---|
| Company A | 25% | Up 5% |
| Company B | 20% | Up 5% |
| Company C | 15% | Up 5% |
| The other 7 companies | 40% in total | All down 2% |
- The three giants add 60% × 5% = 3.0% to the index.
- The other seven take away 40% × 2% = 0.8%.
- The index rises 2.2%, even though 7 of its 10 companies fell.
Three companies: 60%
An index can tell you how the biggest companies did, not how most companies did.
This is why traders watch the results of the largest companies so closely during earnings season. One report can move the whole index.
Trading an index
With a CFD, you can trade on an index rising or falling without buying every share in it. Keep in mind:
- Concentration risk. If a few companies dominate the index, news about them can move your position as much as news about the whole economy.
- Big events move indices. Interest rate decisions, inflation and jobs figures can move every share at once. Major US releases usually come out at 08:30 ET, and Federal Reserve decisions at 14:00 ET.
- Costs. The spread, a commission and an overnight swap apply. Check the current figures on the platform.
Index trading hours in US Eastern time
Each index follows the hours of its home market. US markets follow US clocks, so their hours stay the same in ET all year. Markets abroad keep their own clocks, so their hours move in ET when the US changes time.
| Index | Main session while the US is on EDT | Main session while the US is on EST |
|---|---|---|
| S&P 500, Nasdaq 100, Dow | 09:30 to 16:00 ET | 09:30 to 16:00 ET |
| DAX | 03:00 to 11:30 ET | 03:00 to 11:30 ET |
| FTSE 100 | 03:00 to 11:30 ET | 03:00 to 11:30 ET |
| Nikkei 225 | 20:00 to 02:30 ET | 19:00 to 01:30 ET |
The US is on daylight time (EDT) from the second Sunday in March to the first Sunday in November, and on standard time (EST) for the rest of the year.
- Europe. Germany and the UK change their clocks on the last Sunday in March and the last Sunday in October. In the few weeks when the US has changed its clocks and Europe has not, from the second Sunday in March to the last Sunday in March, and from the last Sunday in October to the first Sunday in November, the DAX and the FTSE 100 run from 04:00 to 12:30 ET.
- Japan. Japan does not change its clocks, so the Nikkei 225 opens 1 hour later in ET while the US is on daylight time. The Tokyo market also pauses for lunch.
Index CFDs can often trade outside these main sessions, but prices can move less smoothly and spreads can be wider. Check the exact hours for each index on the platform.
Risk disclosure: Trading involves significant risk of loss and is not suitable for all investors. Past performance is not indicative of future results. This brief is for information and education only. It is not investment advice, a recommendation or an instruction to buy or sell anything. The likely market reactions described here are our assessments of what could happen, not predictions, and markets can and often do move differently. Figures and forecasts come from third party sources and may change. Make your own decisions, and consider independent advice if you are unsure.
