What is Index CFD trading?

Index trading is trading on the broad movement of a country's share market index. Index CFDs offered by CFD Providers are normally priced off the corresponding futures contract of the main index of the particular country. Read on, it does make sense.

The Basics Using an Australian Perspective: 

TV news about the move of Australia's share market refers to the either the  'ASX/200' or the 'All Ordinaries'. The benchmark index for Australia is the ASX/200, made up of Australia's top 200 companies. In the futures market, the Australian Share Price Index 200 (SPI 200) is based on the ASX/200. The SPI is the benchmark for traders and hedgers in the Australian equity index market.

Why so popular?

Index trading is not based on one share but on the broader market move. A CFD on the SPI trading provides traders with access to approximately 88% of the total Australian Share market with one trade, hence it popularity.

So as the benchmark of the Australian index CFD contract is the Share Price Index Futures (SPI), each one-point movement in the SPI usually translates to an equivalent one-point movement in the corresponding CFD provider's equivalent index for the Aussie index. This makes is simple to follow.

Note: The various CFD providers each give a trading or brand name to their equivalent of the Aussie index. The CFD providers will normally provide a base figure for their respective index (brand name) that corresponds to the SPI level at the commencement of each trading day and this value will vary slightly each day depending upon how many dividends were paid by the major companies.

Stop-loss order: 

The most common and important tool in currency trading is the stop-loss order. A stop-loss order ensures that a particular position is automatically liquidated at a predetermined price in order to limit potential losses, should the market move against a trader's position. This allows the trader to live to trade again.

TRUMarkets always provides stop loss levels in our Index Trade suggestions. For whatever reason, if the market starts going in the wrong direction traders tend to panic and say to themselves, it will turn around. Then comes the anxiety of when to exit. Not only could the trader lose more money than intended, but also the trader often loses morale, as it's now much harder to make up the losses. This is the reason TRUMarkets always suggests a stop-loss level in our Forex trade suggestions. Even if the market starts going in the right direction 5 minutes later, you have not eliminated the risk of it turning around. Trading rules are there to follow, not to try to go around them. History shows that over the long term, not following a stop-loss strategy will only hurt the trader.

The destroyer any trading strategy: One of the more common and often fatal mistakes a trader may commit in a loosing trade is when they begin to think of excuses not to close the position - he or she thinks that perhaps the market will suddenly turn around and move in a favourable direction. The trader keeps thinking of this, and doesn't have the discipline to close the falling position. Don’t let this happen and set exit points when you establish the trade - you can always change them once the trade goes in your favour.

Other world indices: Like the with the Aussie market in which the main CFD traded index is priced off the SPI, in other countries such as the UK and US, their prices are similarly priced off the Dow Futures and FTSE Futures. You will need to check what the equivalent price level of the particular index CFD is trading at with your CFD provider before you enter the trade, as we will be quoting our trades based upon the futures contract.

The TRUMarkets Trading desk will take the emotion out of your trading by providing strategic entry and exit points via email and SMS text message.

Our team of traders continuously scan the markets to deliver the best available index trading ideas. The Index trade suggestions are then delivered to you on a real-time basis via SMS text message and email, with both the fundamental and technical reasons why we believe this is a potential index trade, outlined in simple and concise language along with a chart that highlights the technical aspects of the suggestion. We also suggest a stop loss level that minimises the risk associated with FX trading.  

As well as Index CFD trading suggestions, the members area is continually updated with expert commentary and behind-the-scenes insights into what is causing the cross rates to move. Our analysis of the top-traded currency crosses is also continually updated to reflect changing technical levels that affect future index trading decisions.