Definitions
- Index or Stock Index
- Invest in Stock Index CFDs online
- How Stock Index CFDs Work?
- Example of Stock Index CFDs trading
Index or Stock Index
An indicator used to measure and report value changes in a selected group of stocks.
How a particular stock index tracks the market depends on its composition the sampling of stocks, the weighting of individual stocks, and the method of averaging used to establish an index.
Stock Index represents a group of representative stocks within a stock exchange.
Some of the most popular indices are the S&P 500, NASDAQ and the FTSE 100.
Invest in Stock Index CFDs online
Many online Forex and CFD brokers offer a wide range of the globes biggest Index products and like all our products with competitive pricing.
Index products are a measure of a parcel of financial instruments performances.
Most index product combines major stocks on an exchange and measure their performance as a whole to give a broad look at the markets performance rather than being stock specific.
Index CFDs suit traders for either hedging purposes or for those who do not wish to take a stance on a specific stock but a market in general.
Another huge advantage is that Index product nearly trade 24 hours.
Most consist of two small breaks a day but will trade continuously through until the weekend where they are close Saturday and Sunday.
How Stock Index CFDs Work?
As explained, Index CFDs track a parcel of equities on any one exchange and their performance.
As an example take the FTSE 100 CFD.
In this case, broker’s prices quoted will match the underlying prices of EUREX.
The FTSE 100 CFD contract tracks the performance of the top 100 blue chip stocks on the LSE.
You could buy a contract if you thought the FTSE 100 would go up or you could sell it if you believe the market will go down.
Each Point the index goes in your favour you gain £10 and each point the index goes against you the loss will be £10.
Example of Stock Index CFDs trading
You decide that the FTSE 100 is going to rise over the next day or so based on your research.
In this case to make a profit you have decided to buy 1 FTSE 100 contract.
The FTSE 100 contract is the equivalent of £10 per index point.
The current quote for t FTSE 100 is 5300.5 – 5301.0. You wish to buy 1 contract at the offered Asking price of 5300.0.
Opening Position – 5300.0 x 10 = £53,000
The day the FTSE 100 has risen and the current quote is 5360.0 – 5360.5.
The trader decides to sell their FTSE 100 contract at the bid price of 5360.0 to close out the long position.
Closing Position – 5360.0 x 10 = £53,600
Profit/Loss = £600