Almost everyone has heard about index trading but fewer than 5% of personal traders actually do it. One of the most heavily traded indexes is our very own S&P 500 and it trades hundreds of thousands of contracts every day.

As you know every stock fits somehow into a sector. For instance DELL is in the overall tech sector, WorldCom is in the Telecom sector etc., inside of every sector is a handful of companies that make, produce, or service something that we can classify. So with Dell, and Gateway and Compaq all in the overall umbrella of technology, they are further boiled down into box makers or in other words computer manufacturers. Well there is an index for the box makers! In fact there are over 700 indexes listed on the various exchanges and each index will have a number of stocks in it that represent a sector. So first, why trade an index?

The reason you would want to trade an entire index is that when a sector is on fire, it is logical that the index that tracks that sector will be doing well also. For instance for the past few weeks we have been pretty hot on the Chip makers like INTC, AMAT, KLAC, PMCS, etc.. and they have done pretty well. But you still had to be a bit selective to find the right ones to buy. (there were chip makers that didn