Indices

You can trade in the major indices, such as the Dow and the FTSE and the Nikkei using index CFDs which allow you to track the futures prices on the market you want to trade in. Everyone knows the leading indices include the S&P 500, Dow Jones, NASDAQ in the USA, the DAX, CAC and MIB in Europe and FTSE 100 in the UK as well as important Asian indices, such as the Nikkei 225 and the Hang Seng. Many traders do not understand the difference between an index and an exchange. An exchange is where shares or assets are traded. Indices are a selection of assets that added together equals the index value.

A benefit is that index CFDs have over equity CFD trades, since, unlike a share an index CFD cannot go to zero as an index is simply a benchmark of the largest stocks on that particular exchange. Margin requirements are usually small, however if starting out it is a good idea to trade at the minimum amount per point. Another point to note is that Index CFDs are generally commission-free with the providers adding a little on to the bid-offer spread. Some providers even continue quoting index CFDs even when their benchmark index is closed which enables investors to take a view on what they think will happen the next morning.

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