What is a stock market index and how to understand its total

In the stock market environment, you need a way to contrast the ups and downs of the stock prices and values. To track the ups and downs, from week to week, and from year to year. An formal definition of a stock market index is a number calculated to measure the health of the stock market, based on the performance of a group of stocks that meet certain set of guidelines decided by the stock exchange.

If this doesn't make sense to you, think of an index as just a number that lets you see if a group of stocks is up or down, and by how much.

Types of Stock Indexes Investors Use

Stock Exchanges: The NYSE and AMEX
In these big stock exchanges, stocks are sold at auction. Specialists on the floor of the exchange handle the trades for a big company or a few smaller, lower-volume companies, and put buyers and sellers together for the company stocks they represent.

The NASDAQ
The NASDAQ (National Association of Security Dealers) sells stocks that are too small to list on the NYSE or the American Stock Exchange (AMEX). These stocks are known as "over the counter" or OTC stocks, because they aren't traded on the floors of the big exchanges.

Other useful indexes
Find out other useful stock market indexes.

A Stock Market Index: The Dow Jones Industrial Average
Anyone who used to watch the 6 'o clock News with Dad has heard of the Dow Jones, but it's doubtful that most people have even a vague idea of what it actually is. For general purposes, the Dow Jones Industrial Average is a number that gives the world a snapshot of how well the stock market does on any particular day.

Dow Jones History
Charles Bergstresser, Edward Jones (now the name of a private investment firm) and Charles Dow founded Dow Jones & Company in 1882, publishing an index of averages of growth stocks in the "Customer's Afternoon Letter".

The NASDAQ 100
The NASDAQ 100 index is (of course) based on stocks that are traded on the NASDAQ rather than the NYSE, and you will often see this index listed next to the Dow on market-related TV shows or in the newspaper business section.

Standard & Poor's 500, 400 and 600
The S&P 500 composite is the third most widely-cited and well-known index based on the 500 major corporations in the country and including companies listed on all three major stock exchanges as well as a few select foreign corporations who also have historical influence the American markets.

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