Trade the FTSE., S&P 500, DAX, Nikkei, Nasdaq, dow Dow 30, and gain access to European, US, and Asian markets by trading these exciting global indices that will help you explore various investment strategies. Take advantage of the rise and fall of major stocks like Adobe, Adidas, Amazon, Nike, and Olympus among many others.
Diversify your trading portfolio with our world-class trading platform.
Trading Indices and Stock Index CFDs
Indices are a statistical measure of the performance of an asset class in the securities market which allows traders to understand and track the performance of a class of assets. Indices cannot be purchased directly – traders purchase an investment product such as an index fund or stock index CFD. Stock index CFDs (Contract for Difference) in the stock and bond market are financial instruments covering the value of a portfolio of securities which belong to a specific segment. There are various instruments that enable traders to take a short position on an index or have leveraged exposure to the index.
The advantage of trading index CFDs is that the trader enjoys exposure to the wide variety of assets included in the index, in a single transaction. Furthermore, trading CFDs based on indices is an easy field to enter, compared to investing in stocks. Indices tend to be a more balanced avenue for trading, since it is less affected by the fluctuation of a single stock, but its value is based on the collective performance of a large number of stocks.
Moreover, indices and stock index CFDs allow long or short trading, while certain stocks cannot be traded short. This expands trading opportunities by enables traders to profit on both the rise and fall of stocks. Indices are also liquid and volatile, with extensive trading hours, which offer additional benefits for traders.
Indices are a great way to understand the state of an economy at a high level. They offer a single statistic that provides a basic understanding at a glance. Looking at the historical movements of indices, you can understand market reactions to various scenarios throughout financial history, enabling traders to learn from the past and improve their future decisions relating to trading CFDs and stocks.
Variety of Indices and Stock Index CFDs
There are different types of indices, and stock index CFDs, including capitalization indices, fixed income indices, sector indices, residential property indices, strategy indices and volatility indices.
Examples of stock index CFDs include the Standard and Poor 500, one of the most popular indices in the United States. It covers 70% of the stocks traded in the USA. The Dow Jones Industrial Average (DJIA) is another major index, which comprises stocks from the 30 top-performing enterprises in the United States.
One of the advantages of trading stock index CFDs is the wide selection available to traders so that each trader can invest in a sector or region he is most interested or familiar with.
WHY TRADE INDICES?
Stock market indices are a collection of assets and are traded in large volumes. They are a wonderful place for beginners, day-traders, and long-term traders alike.
Here’s some of the benefits of trading the major indices:
Highly liquid with tight spreads and clear chart patterns.
Volatility – each Index tracks the health of an associated economy.
Traders can open positions on whether Indices will go up or down.
Variety of Indices in many sectors .
HOW ARE STOCK INDICES CALCULATED?
There are many ways to calculate the value of a stock index:
The Market Capitalization Weighted Method
Stocks in the index are weighted using the market capitalization of listed companies. The largest company will generally lead to the most movement in the index (i.e. Amazon or Apple). The S&P 500 is a market capitalization weighted index.
The Price Weighted Method
Stocks in the index are weighted by price. This can lead to companies with smaller market caps but with higher stock prices moving the overall index. The Dow Jones Industrial uses this method.
The Equal Weighted Method
Each stock is calculated and then summed and divided by the number of stocks within the index.
The Fundamental Weighted Method
The index is built using fundamental aspects such as company earnings.
The world’s most popular indices use the market capitalization weighted method.
WHAT MOVES THE INDICES MARKETS?
An index is primary affected by all the stocks within it. However, factors such as politics and economic issues can affect an index
Indices are influenced by the following:
Economic influences
If the US economy is in trouble, the S&P 500 will be affected. Traders look at inflation, unemployment, and treasury yields to determine the health of a country and associated Index.
Politics
From trade wars to new economic regulation, politics can have adverse effects on indices.
Who is CMTrading?
Why Trade Indices with Us?
The reason why so many traders choose to trade indices with CMTrading is simple – our excellent service and support. We guide our traders’ through each step with weekly educational webinars, eBooks, private training sessions and much more.
Trading indices allow you to diversify your trading portfolio and invest in the world’s major financial centers. We provide our traders with a leverage of up to 100:1, tight spreads and around-the-clock trading and support. With CMTrading, you can trade the world’s leading indices including the Dow Jones, FTSE, DAX, JSE and much more. With all this combined, CMTrading is your one-stop-shop for the ultimate trading experience.
With CMTrading’s AI Chart Scanner, you can get a full technical analysis in seconds – completely free, powered by cutting-edge artificial intelligence.