Trading Indices

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Indices Trading

An “Indices” is an index of value of a specific market. For example, when a market starts it is at 0, and then the growth is indexed from that point onwards. Indices are traded in the form of Contracts for Difference or CFDs. CFD trading greatly diversifies the instruments you have acess to, allowing for a more risk resistant trading strategy.

Why Trade Indices?

GLOBAL INDEX'S

Trade on all major indices around the globe including UK100, German 30 and Dow Jones

LOW MARGIN REQUIREMENTS
Enter the market with only a fraction of the total trade size—up to 200:1 leverage for all major indices

COMMISSION FREE TRADING

Trade commission free with no exchange fees—your transaction cost is the spread

Trading

What is an Index?

Historically, investors needed a way to analyze the overall performance of the market. After all, you could never make a statement on the US economy by only looking at, say, Apple Inc.'s stock. This need begat the stock index, generally a collection of top-performing stocks grouped and averaged to give a quick glance at the market as a whole.

An index is a good way to look at particular markets, but for investors, it offers a way to gauge the performance of their individual portfolios, so underperforming specific investments can be adjusted to be more in line with the general trend of the market.

Indices can have a variety of variables. For starters, the number of stocks in any particular index can vary wildly, from a few dozen companies to thousands. The price of an index is found through weighing. Price-weighted indices are averaged based on the price of each component stock. Capitalization-weighted indices adjust the calculation based on the size of the companies included. Many other factors are represented depending on the stock index in question.

These days, there are hundreds of stock indices globally, representing companies nationally, regionally, globally, and even by industry.

Advantages of Trading Indices
 

Investing in stocks has a wide appeal globally, but the barrier to entry can often be high. Say you want to invest in an economy through an index to attempt to mirror the performance of that economy. You could simply buy shares in all the stocks on the index, but that could get costly, especially in light of broker's fees for transactions. Some turn to the futures market, trading the index through an ETF. The ETF is a fund that has shares in all the stocks in the index. With ETFs, you generally have 100% margin, meaning you have to put up the full value of the index to participate.

Our index products, however, are traded as contracts for difference (CFDs). With CFDs, you have the advantage of trading on margin. You put up a fraction of the capital and still get the full value of the trade. But that's not the only benefit.

Trading indices as CFDs removes the barrier to trading. When you trade on the futures market, you have settlement periods. Short selling is typically impossible without a significant account balance. Plus the fees for each transaction are significant.

Index CFDs, on the other hand, have no settlement periods, short selling is as easy as buying, and you only pay the spread. With CFDs, you can scalp the market much more easily and you can enter the market with much less in your account.

Trading Hours

Trading hours on indices are generally based on the underlying exchange’s hours. However, we do allow trading outside of market hours. For example, the German 30 will close at 4:30pm (UK time), but we will allow our clients to continue placing positions on this market. Please be aware, that the spread will be increased due to limited liquidity.

RISK WARNING

CFDs are leveraged products that incur a high level of risk and can result in the loss of all your capital and may therefore not be suitable for all investors. You should not risk more than you are prepared to lose and before deciding to trade, please ensure you understand the risks involved, take the level of your experience into consideration and seek independent advice if necessary. We strictly do not provide trading advice.

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RISK WARNING

CFDs are leveraged products that incur a high level of risk and can result in the loss of all your capital and may therefore not be suitable for all investors. You should not risk more than you are prepared to lose and before deciding to trade, please ensure you understand the risks involved, take the level of your experience into consideration and seek independent advice if necessary. We strictly do not provide trading advice.

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