How to trade indices?

Learn how to trade the most popular stock market indices, including index cash CFDs and futures CFDs, and discover index trading strategies.

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Understanding what index trading is?

Index trading allows you to get exposure to an entire sector or economy with a single trade. Well-known indices are essentially baskets of individual, but related, stocks that are usually ranked by independent institutions like the FTSE Group, Deutsche Börse, and Standard & Poor’s. 

The majority of traders will be aware of the names and abbreviations of the leading global stock indices, but not everyone knows that they can also be traded via CFDs. Stock index CFDs can be analysed, bought and sold in a similar way to the way traditional stocks are traded.

Find out more about exactly what is index trading.

How to trade indices?

The most popular way to trade indices is via Contracts for Difference, or CFDs. These financial instruments allow traders to profit both from falling or rising prices; open a short (sell) position if you think the index will fall; open a long (buy) position, if you think an index will rise.

There are two ways to get exposure to the index price when you use Axi to trade CFDs: index futures or cash indices.

Traders with a long-term market outlook tend to prefer index futures as the overnight funding charge is included in the wider spreads, as opposed to cash indices. Index futures are traded at the price that futures traders agree to for delivery in the future (future price).

Cash indices are generally preferred by traders that have a short-term outlook as they have tighter spreads than index futures. Cash indices are traded at the current price of the underlying market (spot price).

Ready to start trading indices?

Follow our process to start index trading today:

  • Understand what index trading is and how it works
  • Open a demo and live account
  • Discover the index you want to trade
  • Select your trading platform
  • Open a position, monitor and close your first trade

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Discover our popular indices markets

To get a better understanding on the stock index markets you can trade with Axi, see below some of the most popular or refer to our full list of index cash CFDs and index futures CFDs in our product schedule.

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How much money do you need to start trading indices?

To start index trading online, there are two important things that you need to consider. 

First is the amount required to open an account. While most platforms will ask you to deposit a minimum amount to open an account, with Axi there is no minimum deposit requirement. However, in order to place a trade, you must ensure that you have enough funds deposited in your account. 

The other important consideration is the amount of margin that the platform provides. Most platforms require you to post a relatively high initial margin, which generally must be maintained.

The exact margin requirements could vary depending on the region and type of account, Axi offers 30:1 leverage for standard trading accounts on indices.

 

What is the best time to trade indices?

There are certain time periods throughout the trading week where market volumes and prices tend to go wild as the market factors in all of the news and events since the previous close. Thus, for seasoned traders, the interval between 9:30 to 10:30a.m. ET is one of the best hours of the day as it offers the biggest moves in the shortest amount of time. You should also consider that different indices are traded at different times, depending on the individual exchange. If you are a novice, you may want to avoid trading during these hours of high volatility.

During different time zones, the best time to trade is simply when they are open. Since they are not open 24 hours a day like the forex trading market, you need to discover the right time for yourself to open a position on the indices market.

 

An example of index CFD trading

Let’s assume that the FTSE is currently trading at 6659.97. Your technical indicators suggest an entry signal with a belief that the market sentiment is positive towards FTSE, and you decide to purchase one lot. This position size has USD$1 of profit or loss for every point of movement in the price.

Two days later, the FTSE has pushed higher and is trading at 6701.97. Now, your profit is calculated by subtracting the opening price from the closing price: (6701.97 - 6659.97) x USD$1 = USD$42.

Note: In the above example, profit and loss are calculated in the currency of the region that the index is tied to. However, at Axi, the profit and loss are automatically converted to your account currency in real-time, based on the current exchange rate.

Index trading strategies

Trading on an index minimises the risk and cost that you would face by trading individual stocks, with clean price movements and creating a diverse portfolio. Many of the large stock indices around the world are considered to be strong indicators to country-specific and global economies, allowing traders to utilise powerful index trading strategies to improve their edge in the market.

Because there is no hard and fast rule to determine the best trading strategy when trading indices, you should simply start with the one that best fits with your trading style and edge. Understand some of the most popular index trading strategies – like position trading and breakout strategy – to find the trading strategy that works for you.

Index trading platforms and tools

With an Axi account, you get free access to powerful platforms and trading tools designed to help you find your trading edge. Whether you want the simplicity of one-click trading or highly advanced analysis driven by Artificial Intelligence, we've got the right index trading platforms to service any level of trader.

MetaTrader 4

MetaTrader 4 is the smart choice for online traders everywhere who are looking for a trading edge. Simple for beginners and full of advanced functions for professionals, the MT4 platform helps you unlock unlimited trading possibilities.

Learn about MT4

PsyQuation

Built to utilise Artificial Intelligence and Machine Learning, PsyQuation is a highly advanced trading analytics platform designed to reduce your trading mistakes and provide powerful performance analytics.

Learn about PsyQuation

AutoChartist

Autochartist continuously scans the market for customised trade opportunities, based on realtime pricing and your specific trade setups, then alerts you to potential trades.

Learn About Autochartist

Discover more markets to trade with Axi

Choose from a variety of global markets to trade with Axi, using ultra competitive spreads & flexible leverage to trade your edge.

Index trading FAQs

Leverage is similar to a loan and involves borrowing an amount of money that is provided to a trader and makes it possible for them to buy and sell trading instruments. Axi offers 30:1 leverage for standard trading accounts.

Yes, you can sell futures before they expire. You are not required to hold a futures contract till expiry. Most traders exit their contracts before the expiry date. You can do so by either purchasing an opposing contract that nullifies the agreement, or by selling your contract.

A current and complete list of indices can be found in the product schedule. You may also refer to our index trading page to see a list of our most popular indices, including their spread, margin and leverage.

Stock trading is the trading of shares of specific companies with individual prices. Once you buy a stock, it has to be transferred to you from the seller and you own it.

Index trading is the trading of a basket of stocks that make up the index through a single instrument. The index tracks a basket of stocks that are used as indicators of an overall representation of the entire stock market (like S&P500) or they could be a specialised segment of a stock exchange like technology (NASDAQ).

After-hours trading begins at 4 p.m. and lasts till 8 p.m. EST. It allows you to take advantage of the opportunities that happen outside the main trading window – like news announcements and volatility.

However, underlying market spreads can become wider during after-hours trading due to reduced liquidity. Thus, the trade might cost you more during this period. Pre-market and after-hours trading is collectively referred to as extended trading. Pre-market occurs before the regular market opens during 4 a.m. to 9:30 p.m. EST.

Trade indices online with Axi

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