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Learn Index Calculation To Take Correct Decisions For Stock Market Investment

Stock market is also said exchange where people purchase and sell different shares or stocks of various companies. The exchange means the place where both the parties agree upon a price where the stock can be sold and bought. It depends upon the reputation and functioning of a particular company whether people will invest the stocks of that particular company or not. If a company is performing well then of course the number and amount of investment for the stocks and shares of that particular company will raise. Again the company that is not able to perform well may face a vice versa situation. Again methods like index calculation is included for people who invest so that maximum loses can be avoided.

Changes in Stock Market

Stock market has changed since last few years due to involvement of technology in it. The introduction of various computer technology such as internet, applications, software and many others have changed the way people used to trade before. The online trading system has now become more active and popular than the face to face trading that people did before. Also there are now a number of elements such as index provider that help the people in efficient trading.

Previously, investors and buyers had to meet up in a hub known as the exchange floor where they can trade their stocks or shares. But now the physical exchange system is replaced recently by the online exchange system that is much faster and much convenient than the traditional ways. But still in the presence of the online system also there are a number of things that the traders need to understand and take care to avoid lose.

Indexes

Indexes in stock market refer to the graph that measures the average performances of some stock types or economy sectors. Thus, an index is created by collected similar types of stocks or sectors at one place. Some of the most famous stock indexes that you must have heard of are New York Stock Exchange, S&P 500 and others.

These indexes are mainly to have an overview of how the market of particular category is performing. You can also check the performance of the stocks or shares of a particular company using these indexes.

Index Types

Basically, there are two types of indexes that are used in stock exchange. The first type is that of price weighted index. It is mainly to analyze the stock prices of various types. Here, it does consider other factors such as the size of the company or others.

The second type of index is the market value weighted index. This type does consider the company size. Here of course the changed prices of the shares are important but not as much as the other factors such as company size and the number of stocks.

Thus, an index is an important tool in any stock exchange process. It is important in viewing the nature of the stocks so that you can decide about trading in it.