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Trading indices allows traders to get more exposure to the market by tracking more than one individual stock. But how do you exactly trade indices?
In this article, we are going to cover index trading methods and discuss the factors to look for when picking an index.
Plus500 offers CFD traders the option to trade future contracts on some of the most popular indices. CFDs on futures allow individuals to place Buy and Sell orders depending on whether they believe that an index will gain or lose in value. While there are many positive features to trading index futures contracts, one must be mindful of the risks associated with this form of trading due to the unpredictable price fluctuations that can occur. It must also be noted that while you can gain more money than your initial margin when trading index futures, you can also incur more losses if a trade goes against your position. Thus, in order to execute an index CFD trade, a trader must consider their position.
Plus500 offers traders an opportunity to trade based on the value of these contracts, in the form of Contracts For Difference (CFD) instruments.
When you are ready to trade CFDs on Indices with Plus500, you can open the instrument and view the relevant instrument information such as charts, spread information, rollover details, and more. You can also use Plus500’s free demo account until you feel confident to trade using real money.
Choose whether to open a ‘buy’ order if you believe the index will rise or a ‘sell’ order if you believe it will fall. Trading CFDs means you are not buying or selling the underlying asset but rather you are opening a contract on which direction you predict the market will move.
The Plus500 platform offers some trader-focused features to help you manage your trades. Some examples include an option to ‘close at profit’ which will automatically close your position at a specific level set by you in order to protect your profit, and ‘close at loss’ if you want to set a limit for the amount you are willing to lose.The ’close at profit’ and ‘close at loss’ features are free of charge, and do not guarantee your position will close at the exact price level you have specified.
Bountiful market indices also mean that picking an index to follow can often be a challenging task, and since indices are unique trading tools because their value fluctuations are directly influenced by the rise and fall of other instruments, there are factors that traders should take into account when picking an index to follow. Accordingly, just as traders research the fluctuations and factors for shares or commodities, it is important to weigh all the factors that may move an index in either direction, including various companies and sectors.
Finally, when choosing an index one must note that multiple factors can affect its performance. Factors that can affect indices include, but are not limited to, political events, traders sentiment, and unemployment reports. These are events that may move an Index in a specific direction, so even if the biggest company in the Index sees a big jump, the index value as a whole may drop due to the movements of the other companies included in the Index.*Product offering is subject to operator.