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.
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).
Follow our process to start index trading today:
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.
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.
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. Depending on your region, Axi offers up to 500:1 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.
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.