What Are Indices?
They are a set of instruments, such as stocks, that allow market players to track the increase and vector of movement of a specific industry or even a whole economy. They can be traded or used as an indicator of market fluctuations and lucrative investment opportunities.
For example, S&P 500 (US), FTSE 100 (UK) or DAX 30 (Germany) are calculated based on the market cap of the largest companies of these countries. If an index is growing, this means the increase of capitalization and signals a favorable investment situation.
The Most Popular Indices Are:
Why Is Trading
How to Trade Indices?
The most convenient and reliable instrument to trade indices is CFDs. Such derivatives are usually traded in the currency of the relevant stock exchange. For example, US indices are valued in USD, while German ones are valued in EUR.
You can also trade CFDs outside the time of operation of the stock exchange, which makes it possible to earn more, like on Forex.
Still, you have to analyze the economic situation in the country, which index you’re going to trade:
Choose the country
and the industry you know
Don’t try to guess, and analysis needs profound knowledge and being up-to-date with all the news. Next, pick up the index for trading.
These are index constituents (companies-contributors), economic data, and political changes of the country. So, watch companies’, financial and political news carefully and monitor the economic calendar.
Listen to forecasts
...and try to keep ahead of the current situation.
All in all, trading indices works the same as common Forex trading and implies similar calculations of a risk-reward ratio. The only thing is you need to perform a deeper fundamental analysis.
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