Indices
Indices are a group of individual Shares which are often grouped by different institutions like significant banks or specialist companies.
Index trading means speculating on price movements in stock Indices. Some of the world’s most popular indices are S&P 500 and NASDAQ 100 (New York), FTSE 100 (London) and DAX 30 (Frankfurt), AUS 200 (Sydney) and Nikkei 225 (Tokyo), CAC 40 (Paris) and Euro Stock 50.
An index is an aggregated average of certain stocks. Indexes can be traded or used to measure the health of a market. More often than not, the health of a particular economy can be measured by the Index of the country’s leading firms.
For example, if the Dow Jones were to perform poorly, it would not be wrong to estimate that the US economy is performing poorly. The wise trader, even if he doesn’t trade the Index directly, would be attentive to its performance.
Indexes started with the Dow Jones, when a revolutionary journalist decided to create an average of the largest companies listed on Wall Street.
Since that point, indexes have been used to tell the health of entire countries and industries. It’s no wonder that traders go from mania to depression according to their movement.
How to trade indices
1 Choose an index you are comfortable with
"Firstly, you should research and identify the opportunities offered by different Indices. Then you should study how volatile the price movements within these markets can be. After you have analyzed these markets, based on your knowledge too, you can choose an Index to trade with.
2 Choose whether to Spread bet or trade CFDs
Identify the differences between spread bet and CFD, then decide which you want to trade with.
3 Decide to Buy (go long) or Sell (go short)
After you have researched enough and have decided with which index you will trade with, you will need to determine a direction to trade-in. That means you can buy (go long) if you think prices will go up, or you can sell (go short) if you believe prices will go down. Both spread betting and CFD trading allow you to profit from falling as well as rising markets.
4 Open your indices positions
When placing your positions, it is crucial that you take actions which protect yourself against the sudden movements of the market and pay attention to the scope of losses that you feel comfortable with. fx134 offers smart risk management features like stop losses, limit orders, take profits for the market you choose to trade on. Remember to choose a trade size that fits your budget and doesn’t over-leverage your account.
5 Monitoring and closing your trade
Once you have opened a position on your choosen index, staying on top of market movement can help ensure you lock in profits and minimize any potential losses. With our powerful, trading platform available for both iOS and Android, you can monitor your position on the go and get alerts.
