An index measures the overall performance of a group of stocks rather than a single company.
An index is a tool that tracks the combined performance of a selected group of companies, giving a single number that represents how that group is doing as a whole. Instead of following one company, an index reflects the broader direction of a market or sector. Indices are widely followed because they show the “big picture” — whether a market is generally rising or falling. They are influenced by factors like corporate earnings, interest rate decisions, and major economic news. For traders, an index offers a way to engage with overall market movement rather than the fortunes of any single business.
Think of an index like a class average. One student’s score tells you little about the whole class, but the average score tells you how the class is performing overall. An index works the same way — it summarises many companies into one number, so you can see the general trend at a glance.
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