An index is a way through which you can estimate the price performance of a firm or basket of assets by using the various methodology and standardized metrics. In the financial market, indexes are generally used as a benchmark to determine the performance of an investment. Passive Indices Trading has gained widespread popularity as a cost-effective method to replicate the returns of famous indices. It includes Dow or S&P 500.
What is Indices Trading?
Indices trading is a method through which the traders can harvest profit from the price shifts of indices. There are numerous indices present in the financial market for trading. They estimate the performance of the different stock markets, which include: sectors or countries, or types of commodities. The trader can either trade sundry indices or can focus on just one single index. It all depends on the strategy he/she is adopting.
Indices trading is different from that stock or commodity trading. Indices cannot be sold and purchased as currency pairs or commodities. It is because they are just an indicator of the price shifts of numerous assets and hence do not have any physical basis for trading. Instead of these indices, investors make use of derivatives such as CFDs, index futures, ETFs, and digital 100s to meditate on the shifts of several indices.
Features of indices trading through CFD
- The trader can access numerous indices with a single trading account.
- Several markets are available from around the world.
- In indices trading, you can go short or long and make use of leverage with large or small amounts of capital.
Drawbacks of indices trading thought CFD
- Leverage is a double-edged sword; if not used correctly, can lead to massive losses.
- Indices trading is regarded as competitive and hence needs commitment and time to become proficient.
Some of the heavily traded and famous indexes for Indices Trading
1) NASDAQ 100: Also known as “the United States 100”. It is a capitalization-weighted index that comprises more than 100 technical firms in the United States.
2) The FTSE 100: Also known by the name “the United Kingdom 100”. It is used to indicate the top hundred companies of the United Kingdom in terms of market capitalization.
3) CAC 40: The other name of CAC 40 is “France 40”. The CAC 40 comprises the top 40 biggest firms in France in terms of market capitalization.
4) The DAX: Also known by the name the Germany 30″. It comprises 30 major German firms.
5) Nikkei 225: The biggest price-weighted index in Japan is named Nikkei 225. It is a group of 225 most prominent firms.
6) Dow Jones: Usually known as Wall Street. It comprises the top 30 public-owned firms in the United States.
Indices Trading and financial service providers
To practice real-world trading, you require a suitable brokerage firm that fits well into your trading expectations. The broker is a primary entity that serves as a link between the indices market and the trader. It provides various platforms through which you can analyze the market trends, market movements, and trade by setting instant bids.
The factors one should consider before selecting a suitable broker for Indices Trading are:
1) The central authority regulating the financial service provider
2) Check the certificate of regulation and license number
3) The maximum leverage offered by the broker
4) The amount of spread offered on indices trading
5) The trading platforms, tools, and technical indicators which it provides
6) Most important the charge taken by the broker on each account or trade
7) Variety of accounts offered such as demo account, retail account, professional account, and Islamic trading account
8) Check whether the broker provides dedicated customer support service
9) Research tool available with the broker
Top Indices Trading Platforms for Traders
1) HFTrading
It is a leading financial service provider offering excellent trading services to its clients. It is regulated by two legitimate authorities which include the Australian Securities and Investments Commission (ASIC), as well as the New Zealand Financial Markets Authority (FMA). The broker provides trading on a wide variety of tradable assets class including stock trading, cryptocurrency trading, forex trading, indices trading, and commodity trading.
HFTrading is a trading brand of CTRL limited, a New Zealand-based firm.
The license number of the broker is:
- For FMA: LFSPR No. FSP197465
- For ASIC: AFSL No. 414198
Trading charges
- Max Leverage can go up to 1:400
- The minimum deposit to open a trade with the broker is $250
- Spreads starting at 0.1 pip
- Silver account leverage: up to 1:200
- Gold account leverage: as high as 1:400
- Platinum account leverage: up to 1:400
Advantages of the HFTrading
- ASIC and FMA regulated
- Commission-free trading available
- Trading available on MetaTrader4
- More than 350 asset classes are available
- 24/5 dedicated customer support service
- Execution speed 0.05 seconds
2) T1markets
T1markets is another famous broker which offers indices trading through complex financial derivatives. The authentic regulatory authority regulating the firm is the Cyprus Securities and Exchange Commission. The broker provides trading through advanced trading platforms which include Meta Trader4 and Web trader. They send real-time data about market price shifts and market trends. Thus, it helps you to make a potential decision based on analytical and statistical data.
Trading charges
- Max Leverage: 1:400
- The minimum deposit to open a trade with the broker is $250
- Minimum pip value of 0.03
- Silver account leverage up to 1:200 on the professional account and 1:30 on a retail account
- Gold account leverage: as high as 1:400 on the professional account and 1:30 on a retail account
- Platinum account leverage: up to 1:400 on the professional account and 1:30 on a retail account
Advantage of T1markets
- CySEC regulated
- More than 300 assets and 10,000 markets
- Zero commission fee
- 24/5 dedicated customer support service
- Execution speed 0.05
3) 2invest
The 2invest is the trading name of the famous Aronex Corporation Ltd and was established in the year 2019. Though it is a new brokerage firm, still it has attracted a larger number of traders. The broker is regulated by the central regulatory authority of the Seychelles Financial Services Authority (SFSA).
It allows trading on a wide variety of asset classes which includes forex, cryptocurrency, and commodities apart from index trading. 2invest is also known for its excellent trading features at affordable trading charges.
Trading charges
- Max Leverage: 1:500
- The minimum deposit to open a trade with the broker is $250
- Gold account leverage: as high as 1:400 on the professional account and 1:30 on a retail account
- Silver account leverage up to 1:200 on the professional account and 1:30 on a retail account
- Platinum account leverage: up to 1:400 on the professional account and 1:30 on a retail account
Advantage of 2invest
- The Seychelles Financial Services Authority (SFSA) regulation
- 350+ markets to trade on
- Zero commission fee
- Dedicated customer support service available from Monday to Friday between 1:00 and 10:00 GMT
- MetaTrader 4 and Web Trader 4 are available
- A wide range of educational materials is available
- Encryption for all communications and transactions
4) 101investing
101investing is a top brokerage firm that provides all the tools and indicators required to ease trading. The Cyprus Securities and Exchange Commission or in short CySEC regulates it under the license number 315/16. The firm is a trading brand of the famous company FXBFI Broker Financial Invest Ltd, founded in the year 2016 and situated at 13 & 15 Grigori Afxentiou str. IDE Ioannou Court, 3rd Floor, Office,301, 4003.
Trading with the broker helps you to enhance your trading standard through its globally accepted MetaTrader 4 trading platform. It requires just three simple steps to open an account with the broker. It includes: Registration, uploading the documents, deciding the trading account and asset, depositing the amount, and starting trading.
Trading charges
- Max Leverage: 1:500
- The minimum deposit to open a trade with the broker is $250
- Pip value up to 0.03
- Gold account leverage: as high as 1:30 retail account and 1:400 or 1:500 on the professional account
- Silver account leverage up to 1:400 or 1:500 on the professional account and 1:30 on a retail account
- Platinum account leverage: up to 1:400 or 1:500 on the professional account and 1:30 on a retail account
Advantage of 101investing
- The Cyprus Securities and Exchange Commission regulation
- 250+ asset classes and 10,000 markets to trade on
- Zero commission fee
- Dedicated customer support service available from Monday to Friday between 07:00 and 17:00 GMT
- MetaTrader 4 and Web Trader 4 are available
- A wide range of educational materials is available
- Useful trading indicators and tools
- Encryption for all communications and transactions
5) Brokereo
It is a new financial service provider that started operating in the year 2020. The broker is the trading brand of established Concorde Investments (Cyprus) Ltd and is regulated by the Cyprus Security and Exchange Commission. It works under license number 189/13.
Brokereo provides negative balance protection to professional and retail clients and segregated trading accounts. Customers can select among three primary account types Gold, Silver, and Platinum to start trading on more than 300 financial CFD instruments. It includes cryptocurrency, commodities, stocks, forex, and indices trading.
Trading charges
- Max Leverage: 1:500
- The minimum deposit to open a trade with the broker is $250
- Spreads starting at 0.07
- For gold accounts, the leverage is as high as 1:30 retail account and 1:400 or 1:500 on the professional account. Minimum spread 0.4
- For a silver account, the leverage is as high as a 1:30 retail account and 1:400 or 1:500 on the professional account. Minimum spread 1.0
- For platinum accounts, the leverage is as high as 1:30 retail account and 1:400 or 1:500 on the professional account. Minimum spread 0.3
Advantage of Brokereo
- The Cyprus Securities and Exchange Commission regulation
- 300+ asset classes to trade on
- Zero commission fee
- Dedicated customer support service available from Monday to Friday between 08:00 AM and 05:00 PM GMT
- MetaTrader4 and Web Trader 4 are available
- A wide range of educational material is available which include courses, articles, tutorials, webinar, and videos on demand
- More than 20 useful trading indicators and tools
- Encryption for all personal information, communications, and transactions
Bottom Line
Indices trading allows you to trade on top indexes from all over the world. There are several other advantages linked to this type of market. However, there is a vast difference between theoretical trading and practical trading. So, try a demo or virtual account before jumping into the indices market.
