Indices

4 minute(s)

An index measures the collective price performance of a group of stocks, usually from a particular country. For example, the UK100 (FTSE 100 underlying) is a share index of the 100 companies listed on the London Stock Exchange with the highest market capitalisation (highest value). Stock market indexes are intended to represent an entire stock market and thus track the market's changes over time.

Let’s take a look at an example. One of the most popular indices in the world is the widely used Dow Jones Industrial Average Index (US30 on xStation), computed by combining 30 large-cap US stocks together into one index value. If the index falls, that means that stocks lost on average.

On the other hand, a rise in the indices’ value means that the stocks became more expensive. Traders can track changes in the value of indices over time and use it as a benchmark against which to compare their own portfolio returns.

But why are traders buying or selling index CFDs? What are the greatest advantages of trading indices? The answer is simple. It’s much easier to buy a CFD on a particular index rather than buying or selling all stocks that are included in it. If a trader believes that the market as a whole could rise in the future, they buy an index CFD. If they believe that the market could fall, they sell the index CFD. It’s an easy and cheap way to speculate on the future of a particular stock market.

What is a CFD regarding to indices trading?

The term CFD stands for contracts for difference. A contract for difference creates, as its name suggests, a contract between two parties on the movement of an asset price. In case of the indices CFDs, parties are speculating on the future direction of a particular index. For example, a buyer of the DE30 (CFD on the DAX index) assumes that DAX could rise in the future.

There are several key features of CFDs that make them a unique product:

  • CFDs are a derivatives product.
  • CFDs are leveraged.
  • You can potentially profit from both rising and falling prices.
  • XTB offers contracts for difference on over 1500 global markets, including indices, shares, currencies, commodities, and ETFs.

The ability to go long or short along with the fact that CFDs are a leveraged product makes it one of the most flexible and popular ways of trading short-term movement in financial markets today.

What are the most popular indices?

There are many indices all over the world, and there are many indices CFDs in our offer. However, some of them are more popular and more liquid than others. It’s quite obvious that the Dow Jones would be closely watched by investors all over the world, while the Botswana Stock Index would garner less attention for traders. If so, which indices are worth looking at? Here is a list of some of the most interesting indices to keep an eye on:

United States:

  • Dow Jones (US30 on xStation5)
  • SP500 (US500 on xStation5)
  • Nasdaq (US100 on xStation5)

Germany:

  • DAX (DE30 on xStation5)

United Kingdom:

  • FTSE100 (UK100 on xStation5)

France:

  • CAC40 (FRA40 on xStation5)

Japan:

  • Nikkei225 (JAP225 on xStation5)

How to trade indices with XTB

Trade on over 20 major indices

XTB covers indices from most of the popular exchanges around the world. As an attractive alternative for diversifying your investment portfolio, positions on indices are rolled over as the underlying contract expires in order to maintain the open position. You can profit from falling indices as well as rising ones, so there are trading opportunities happening all the time.

Leverage up to 20:1

The leverage XTB offers on indices is much better than most exchanges on future contracts. This means that you can gain a much larger exposure for a smaller initial deposit, freeing up your funds for additional positions. 

Deep liquidity

We are currently using a number of renowned liquidity providers. This allows us to offer you the best possible prices, execution and market depth. Even high volume trades can be executed with the lowest possible slippage, thanks to our advanced market solutions. 

No requotes

Because of our ultra-fast execution and price feeds, there are no requotes when trading with us whatsoever. Your order will always be executed at the requested price - instant orders, every time. 

Tight spreads

Go long or short on the UK 100 (FTSE), DE 30 (DAX) and US 30 (Dow Jones) and many more indices with some of the lowest spreads available. 

Trade your way - choose an account to suit your trading style

  • Standard: Instruments are quoted at market prices with floating spreads, and spreads are tighter during more active hours. Trades are executed instantly, and leverage starts at 30:1.
  • Pro: Suitable for the more sophisticated investors. Market spreads are pure and every trade is charged an additional commission. You can benefit from interbank pricing from the FX market with this account.

If you are looking for more

Forex and CFDs are leveraged products and can result in losses that exceed your deposits. Please ensure you fully understand all of the risks.

Losses can exceed deposits