Index trading is a common method for investors to acquire exposure to financial markets without researching and investing directly in business stocks. Trading stock market indices is a risk-mitigation strategy for stock trading. An index is normally constructed as a weighted average of the prices of its component companies. Any index specifies the requirements that a business must satisfy to be included.

By monitoring the performance of a large number of stocks, an index attempts to capture the status of a wide industrial sector or a country's stock market as its whole. For investors to purchase and sell, fund providers develop active and passive index-linked funds, as well as derivatives.

Indices serve as a barometer of the stock market's performance as a whole. The direction of an index's value reveals the economy's or industrial sector's health.