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CFD/Indexes

Indexes


An index is a benchmarking system used to measure stock market trends. Each index groups together several stocks (up to hundreds of them) that share common characteristics. Some of the characteristics used to group companies into an index are:

  • Industry sector, e.g. agriculture or technology
  • Geographic location
  • Recent activity

Therefore, the index value is used to express the best estimate for that business sector. The largest national indices are a barometer of general market sentiment.

What are trading indices?

Among the most important indices in the world, we find:

  1. Dow Jones Industrial Average (The Dow) – The 30 largest companies listed in the USA
  2. S&P 500 Index (S&P) – The 500 largest companies listed in the USA
  3. Nasdaq Stock Market (The Nasdaq) – The second largest stock market in the US, after the NYSE
  4. FTSE 100 Index (The FTSE/Footsie) – The 100 largest companies listed on the London Stock Exchange
  5. Nikkei 225 (The Nikkei) – The 225 largest publicly traded companies traded on the Tokyo Stock Exchange
  6. DAX – The 30 most important German companies traded on the Frankfurt Stock Exchange
  7. CAC 40 – The 40 most important companies on Euronext Paris, the second largest exchange in Europe
  8. S&P/ASX 200 (ASX200) – 200 companies listed on the Australian Stock Exchange

Although the number of companies included in an index rarely changes, companies listed in it are generally reevaluated annually. Companies that no longer meet certain criteria as well as unlisted companies may be replaced.

Index values ​​are not calculated simply as an average of the value of the shares contained therein. Instead, a weighted system is used to portray the strength of the sectors they represent more accurately. Additionally, the same stock can be included in multiple indices if it matches the relevant criteria.

Indices are popular among beginners and experienced investors because with them traders can follow the general flow of the economy or a specific sector. Trading specific stocks, on the other hand, requires a deeper understanding of a company’s internal and external dynamics.

Another advantage is that the broad valuation, inherent to indices, is protected from sharp drops in the value of any individual share. This makes investing in indices safer than investing in specific companies.

Learning how to trade indices is not difficult, but recognizing the best indices can be challenging. You need an experienced and reliable platform like psi-markets to get started.

How to trade index CFDs?

The value of shares on any exchange fluctuates during market hours. Consequently, the value of indices listing such stocks also fluctuates. The value of the index needs to rise above the value at which you entered the trade to result in a profit on your investment.

Trading indices successfully depends on your basic knowledge about the overall strength of the economy as well as the index. A CFD (Contract for Difference) is perhaps the simplest way to enter the index market.

A CFD is a contract between two parties to settle in cash the difference between the opening value and the closing value of a trade. Index CFDs do not require physical trading of goods or securities and are based entirely on index movements.

For example, a technology stock is expected to rise due to the launch of a cutting-edge technology that promises to change the entire scenario. In this case, getting into the CFD market for technology indices early can pay big dividends even in the short term.

Overall, the NASDAQ and Dow are trading at or near their all-time highs as the US economy (December 2019) creates jobs and reduces its unemployment rates at record speed. A CFD focused on these US indices could also be a good investment in the current environment.

Advantages of index trading at psi-markets

Any investment of your money should be made after adequate deliberation and, even then, only with a trusted partner like psi-markets.

psi-markets gives you the option of trading with indices from all sectors and from all over the world. We offer a winning bet that combines trust, instant updates on global markets, exclusive trading tips and a safe and secure platform.

Trade indices full-time, 5 days a week, whenever a market is open anywhere in the world. Our CFD options allow you to invest and then watch your investment mature without having to constantly monitor it. Use our wide range of trading tools to stay ahead of the market and make the right decision at the right time.

With psi-markets at your side, the market will be at your feet.