Equity market indices were invented at the end of the 19th century in order to get a general idea of how share prices were performing overall.

The first index to be created was by one Charles Dow in 1896, the beginnings of the Dow Jones index in the US. An index is simply a group of shares whose price movements are observed together because they are considered to be representative of the market as a whole, or of a particular portion of it.

On the London Stock Exchange there are a number of indices, with the FTSE 100 (or the UK100 for spread betting purposes) the main one. In the US, the key indices are the Dow Jones Industrial Average (US30), the S&P500 (US500) and the NASDAQ (NDQ100). Key European indices are the CAC (FRANCE40) and the DAX (GERMANY30) and many people are familiar with some of the key Asian indices such as the Nikkei (JAPAN225) and the Hang Seng (HONGKONG42).

Most indices are 'weighted', meaning that the bigger companies make up proportionately more of the index, and therefore have a greater effect on its movements, than the smaller companies.