Indices Trading

Index CFDs are contracts for difference over equity indexes. A contract for difference, or CFD, is a type of derivative that allows a trader to gain long or short exposure to a trading instrument’s price. While the trader does not own the underlying asset, they ‘own’ any movement in the price of that asset while they hold a position.

An Index is usually weighted by the market capitalization of each company, with the largest companies having the most influence on the index value. When you are trading indices via CFDs, you are agreeing to open a contract to exchange the difference in the price of a particular index, at the point of open to the point of close. Profit or loss will be based on the direction of speculation you make.

There are several methods you can use to trade Indices including, futures, options, ETFs, and CFDs. Futures and options require a trading account with a broker for each different exchange, futures also typically have large contract sizes.

ETFs (Exchange Traded Funds) are ideal for long-term investors. ETFs can be slightly complicated as they are shares themselves which then own all the shares in that particular index. They are used as a cost-effective method of owning all the index fund shares without buying each individual stock.

CFDs can be the most cost-effective and popular option amongst traders, as they can access multiple markets with only one trading account. CFDs also offer the option of opening long and short positions, unlike ETFs.