Indices are a way to measure the performance of a group of assets. It gives you an overview of how a market is performing and helps understand investment opportunities along with market fluctuations.
One of the most widely known indices in the world is the S&P 500. The S&P 500 tracks the overall performance of the top 500 stocks in the US. If the average price of the 500 stocks goes up, the S&P 500 index climbs higher+. If the average price of the 500 stocks drops lower, the S&P 500 index will decline too.
With CFDs, you can speculate on the value of indices rising or falling and make profits without taking ownership of the underlying asset. (Since you can’t own the index anyway.)
What is Index Trading?
Index trading is the buying and selling of a specific stock market index. Instead of owning the stocks, you speculate the price of an index rising or falling and then decide whether to buy or sell to make a profit.
So here you are buying the average performance of the group of stocks. When the price of shares for the companies within an index goes up, the value of the index increases. If the price instead falls, the value of the index will drop.
When you trade indices online, there are two main types:
1. Index cash CFDs
2. Index futures CFDs