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What is Index Trading?

A stock index is a measure of a country's economy or of an industry sector. Indices combine prices of many companies and represent all the companies together. Three major US indices are: Dow Jones, Nasdaq and S&P 500. It is important not to confuse these indices with the New York Stock Exchange, the largest in the world, or with the Nasdaq Stock Market, the first electronic exchange. There are other indices such as hundreds of global, country and region-specific indexes including MSCI World, Japan's Nikkei 225 ect. All are based on different stocks and vary in the number of companies as well as how they are weighted inside an index.

For example, the S&P 500 represents the performance of the 500 largest companies listed on stock exchanges in the United States. If, on average, the share price of these companies goes up, then the index will rise. On the opposite, if they fall, the index will drop.

Limit Prime Securities offers you trading with CFD indices. That means when you take a position on an index, you are effectively investing in the performance of these company shares and thus avoid factors that influence the performance of individual companies (such as a lack of market volume). By trading CFDs index, you don’t buy the index itself, you only speculate on the rise or fall of its price. An investor can go short or long, set stop and limit losses and apply trading scenarios that are in line with his or her objectives.

Thanks to the leverage, you can multiply the value of a trade through the usage of borrowed capital, and as such, you can increase the potential profit or loss to be realized from the trade. The available leverage for index CFDs with Limit Prime Securities is up to 1:100.

How to trade Indices?

In these indices, where many shares are combined, you can benefit from diversification, which is the primary theory of financial investment. It is in your hands to gain from the movements of the indices by simply buying the indices of a country that you think will perform well in the following days, and selling in cases where you think the opposite will happen.

Check out the video example

List of Indices

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