And now let's take a closer look to the major US stock indices and some of their features that are important for trading.

Major US stock indices
The main US stock indexes are the DJIA index, the S&P 500 broad market index and the Nasdaq high-tech sector index.
DJIA Index
DJIA index (Dow Jones Industrial Average). It was created at the end of the 19th century by its author Charles Dow - the index was published in 1896 and from this year there is a schedule for this index, thus it is the oldest index in the world with the largest history of quotes.

Firstly index included 30 largest industrial companies of the United States, but then the largest companies from other economic sectors were added. As a result, the composition of the index has changed over time.

DJIA is the Important feature

This index has a feature of calculation, which distinguishes it from the other two main indices. The DJIA index is weighted by the prices of the stocks included in it, while many other indices, including S&P 500, are weighted by the companies' market capitalization.

Therefore, the movement of the most expensive stocks has the greater impact on the index than less cheap ones. In the case of weighting by capitalization, the company's “total value” on the market is also taken into account, and it, besides the stock price, also depends on their quantity on the market in free float (Free Float).

index of blue chips, the largest US companies, and in order to enter it companies need to have some capitalization indicators. So this index differs from the more “wider” S&P 500 index, which includes the 500 largest companies.

For example, Boeing shares are the most expensive in the DJIA, their share now exceeds 8%. Over the past year, stocks rose by 90%, which gave about 7% of the annual growth of the index (which was 25% over the year).

Therefore, the movement of the most expensive stocks have a greater impact on the index than less cheap ones. Thus, the Boeing’s weight is three times higher than of Wal-Mart, although, according to market capitalization the aircraft manufacturer is about $ 100 billion less than the retailer.

Therefore, the same percentage change in two stocks, in the case of Boeing, will cause three times greater change in the index. Because of this feature, the movements of the DJIA index can be sharper and stronger than the movements of other indices.