Trading Stock Indices Using CFDs

The indexes are a statistical indicator that measures the combined value of a series of stock prices, which usually are formed with a number of chips of a given market. For example, the FTSE 100 represents 100 shares in the UK. Other indices include the ASX 200, China H-Shares, the FTSE 250, France 40, Germany 30, Hong Kong HS42, Singapore Blue Chip, Japan All-Share, Wall Street, USA SPX 500 and U.S. Tech 100.

Stock indices around the world move up or down depending on investors' reactions to a number of factors, such as updates to the company, economic announcements, the political and natural disasters. A change in any of the stocks in the index will change as the overall value of the index. Despite a stock market index is not a marketable product in its own right, investors can trade on the rise and fall in value.

When trading CFDs on stock indices can go long if you think the value of an index will rise - that is, buying and selling CFDs at a higher price once the value has risen. You can also go short, if you think the value of an index will fall - that is, sell the CFDs and buy back at a later stage once the value has fallen, making a profit on the difference between opening and closing values ​​when you close your position.

For example, if the Australia 200 in cash is priced in 4795/4796 and you think its value goes up, so buy two contracts in 4796, make a deposit of $ 1,250 ($ 625 per contract). A model contract is equal to $ 25 per index point, so that for every point in the index goes up you will earn $ 50, and for every point that falls you will lose $ 50.

After five days, the Index of Australia 200 in cash has risen to 4895/4896 and you decide to take your profit, the sale of two contracts in 4895. The difference between his opening and closing position is 99 (4895-4796). Your gross profit is 99 points x 2 contracts x $ 25 = $ 4950.

CFDs on stock indices can also be short sold, that gives you the opportunity to profit in bear markets, and growing, with guaranteed security setting stops to limit losses.

Index CFDs give you access to 24-hour trading in global equity markets and, as a focused, given high exposure to capital requirements of only 5% of the value of the position.



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