Index Trading

A stock index (or plural indices) is a barometer of the overall performance of the stock markets. Roughly speaking, an index helps traders understand the way the market is moving — and make predictions for the future.

You can use a CFD (Contract for Difference) to make speculations on stock indices. In taking a CFD position, a trader is essentially agreeing to exchange the difference in the price of an index from one time period to another. Trading index CFDs is extremely popular. They’re available for all the key indices around the world, which enables traders to participate in world markets no matter where they are located themselves.

A great entry point to the world of trading
Index CFDs are a great introduction to trading since they follow key global markets.

Less risk than trading individual shares
With index CFDs, you’re spreading your risk across the whole market, instead of one single company.

Make your capital go further
You only need a small sum to leverage a sizeable return with a CFD, meaning your capital goes further.

A CFD is a Contract for Difference. It’s a financial product that allows you to speculate on future changes in the market. A stock index measures the price performance of global stock markets. So, when you trade indices with CFDs, you’re agreeing to exchange the difference in the price of an index from one time period to another. This gives CFDs the advantage of providing a potentially large margin to traders.

With the major indexes, this margin typically stands at around 1 to 3% of the value of the index. With a margin of 1%, you would only need $1,000 in cash to leverage $100,000 on an index CFD. This is what makes CFDs so attractive to traders — you can make your capital go further without having to expose yourself to the risks of investing in a single company.

The most popular stock indices are the top five global markets.

First, there’s the Standard & Poor’s 500 (referred to in shorthand as the S&P 500). This is an American stock market index based on the market capitalization of the largest 500 companies listed on the New York Stock Exchange (NYSE) or the NASDAQ. The S&P 500 is very diverse and contains more constituents than the other US indices. representing about 80% of the total value of American stock markets.

Then there’s the Dow Jones Industrial Average, or the Dow, which is another stock market index measuring the performance of America’s 30 largest companies.

Another popular index is the Financial Times Stock Exchange Index 100 (FTSE 100). This index represents the top 100 companies trading on the UK market.

The NASDAQ 100 is very similar to the FTSE 100, acting as a barometer of the top 100 US companies. It stands for the National Association of Securities Dealers Automated Quotations System and is the world’s second-largest stock exchange based on market capitalization. Typically, the NASDAQ carries large technology companies including Cisco, Microsoft, Apple, and Dell.

Finally, there’s also the DAX, or the Deutscher Aktienindex. This German stock market index comprises 30 of the major German companies trading on the Frankfurt Stock Exchange. Together, these five stock indices are the most popularly traded in the West.

It’s easy to start trading index CFDs with ZFX.

First, you need to register for a trading account. You can do this online, and the process only takes minutes.

Once you’ve added your personal information and verified your identity, you’ll need to deposit some funds to start trading with. The minimum deposit varies depending on the account you choose ($50 is the minimum for a Mini Trading account).

After successfully injecting some capital into your account, you’re ready to trade! Simply download the ZFX trading platform and take your first steps into the world of index CFDs.

A stock market exchange is a marketplace where stocks are traded throughout the day. They’re located in all global capitals, including New York, London, Frankfurt, Shanghai, and Tokyo, which means they operate in different time zones.

Trading is usually conducted from Monday to Friday of each week, with markets closing at weekends and national holidays (which vary from location to location). Opening and closing times differ slightly from region to region, but markets generally open around 9:30 am local time, and close at 4:30 pm.

At ZFX, we pride ourselves on providing informative and educational resources to help all types of traders.

If you’re a first-time trader, you can make use of our demo account, which enables you to practice trading CFDs for free.

Plus, we offer CFD trading tutorials with valuable guides and tips that even experienced traders can benefit from.

Our trading platform is state-of-the-art, and comes with advanced analytical tools and indicators, and comprehensive statements and reporting to assist you with all your technical analysis. That means you can keep learning about indices as you trade.