Indices Trading

What Makes Indices Trading So Popular?

Trading indices is a balanced way to trade on the world’s top financial markets without having to analyse the performance of an individual company stock.

Trading Indices Online

Trading indices online is a great way to speculate on the world’s top financial markets and keep abreast of the top stock markets. Indices are financial derivatives that are calculated as a weighted average of share prices of top performing companies listed on the exchange.

Start trading stock indices from around the world and enjoy the benefits of trading with a Canadian regulated broker!

Friedberg Direct Stock Index Trading

Friedberg Direct offers one of the largest ranges of stock indices of any Canadian online broker, covering markets around the globe. Join Friedberg Direct for online index trading with competitive spreads, leveraged trading and reliably fast execution.

What Are Indices?

Stock index CFDs are financial instruments that represent the value of the underlying publicly-traded companies. One leading index is the S&P 500, which reflects the collective value of the top 500 companies listed on US stock exchanges. If the overall value of those companies’ shares rises, the price of the S&P 500 will go up.

There are also indices that represent smaller companies trading on the NYSE, such as Russell 2000 index, as well as indices for various stock exchanges around the world, from Chinese China A50, Japan’s NIKKEI to Germany’s DAX and Dutch AEX.

Stock Indices in Financial Markets

Stock indices track and measure particular baskets of related stocks. With thousands of stocks trading on the various major exchanges, indices provide an accurate and efficient way for investors to reliably track overall market sentiment as well as to benchmark against their individual stocks portfolios.

The advantage of trading indices over individual stocks, and using them in passive investment strategies, is that they offer exposure to an entire industry. Investors do not have to perform thorough research on individual company reports; they only need to take a bullish or bearish position, depending on the overall market sentiment. The price movement of indices is also a lot smoother as no one individual stock can induce an extreme price spike. This naturally makes index trading less volatile.

Still, due to the amount of activity that takes place on individual stocks, indices offer sufficient volatility for traders to pick out numerous profitable trading opportunities. This is especially true for day traders and news-based price action followers since indices often reflect the broad economic effects of both political and economic shifts.

For risk-averse and longer-term traders, index investing allows for easy and effective diversification. Instead of investing in just a few stocks, where risk is multiplied, indices offer exposure to the entire stock market, while simultaneously reducing the risk of a single company negatively impacting your entire trading portfolio.

Current Leading Indices

Friedberg Direct’s selection of 20 Indices includes the most popular and frequently traded indices in the industry today:

  • S&P 500 – The value of the Standard & Poor 500 is based on the share prices of 500 leading US-based companies
  • DJIA – The index is price weighted average of 30 of the most significant stocks that are traded on the NASDAQ and New York Stock Exchange (NYSE)
  • NASDAQ 100 – This index represents the value of 100 non-financial NASDAQ-traded companies
  • FTSE 100 – The FTSE 100 is a collection of 100 of the largest publicly-traded UK companies
  • DJ EURO STOXX 50 – Euro Stoxx 50 collects together 50 of the largest European companies’ share value
  • Our Trading Conditions page details the full range of indices on offer, including spreads, trading hours and lot sizes.

Why Trade CFDs?

CFD index trading offers a number of benefits to the online trader. Trading CFDs (Contracts for Difference) allows you to buy or sell financial instruments without actually owning the underlying asset. These could be commodities, stock, or in the case of stock index CFDs, the value of the underlying indices.

A trader can place a buy order on, for example, the CAC-40. If the price of the index goes up, when he comes to sell he will earn the difference between the buy and sell price. If it goes down, the trader pays the difference.

Because the trader never owns the asset, the costs are far lower, there are no restrictions on short trading, and an investment can be leveraged by up to times.

How Friedberg Direct Can Help?

You can visit the Education section to learn more about CFDs.

Make Friedberg Direct your CFD broker and enjoy the benefits of trading with a Canadian regulated broker!

Indices frequently asked questions

How does a stock market index work?

A stock market index is a financial indicator which measures the performance of a basket of stocks traded in the respective stock exchange. For example, the S&P 500 Index lists the top 500 companies with the highest market value in the NYSE. Usually, each stock is given a weighted average in the index in relation to their market capitalisation which determines their level of influence over the index price. The stock index price is calculated using the live prices of the enlisted stocks, and any fluctuations affect the index price according to the weighting.

Why is the stock market index important?

A stock market index often represents a specific section of an exchange such as the most valuable companies or a specific sector like finance. Indices allow investors to gauge the health and performance of business activities. They also help detect long-term trends to estimate returns on investments and identify new opportunities. The stock indices are usually more stable and predictable; therefore, many day traders prefer buying and selling index CFDs to enjoy steady trends while avoiding the multiplied risks of trading individual equities.

Which stock market index is the best indicator?

Each stock market index serves as a financial indicator for a different portion of the market. Day traders may prefer an index relevant to the distribution of markets and countries in the portfolio. For example, in the US markets, the NASDAQ Financial-100 covers the finance companies in the NASDAQ Stock Exchange, while the S&P SmallCap 600 measures the small-cap segment in the NYSE. However, if you prefer trading European stocks, the German DAX 30 or the French CAC 40 can prove to be a better indicator and option for your trading portfolio.

What is the best way to analyse a stock market index?

Each stock market index slightly differs from others, and the index details such as components, weighting, calculation and trading hours must be studied. Fundamentally, factors that can affect equity prices, like earnings reports, or represented sectors, like new regulations, have a strong impact on the index. Economic data, like GDP, can also affect the price by stirring the valuation currency. Technically, the relative stability of the trends makes support and resistance levels reliable indicators for price targets and reversal points.