HOW TO TRADE INDICES

1
HOW TO TRADE INDICES What are Indices? Indices
are financial derivatives that are calculated as
an average aggregate of share prices of the
top-performing companies, listed on the stock
exchange market. They are basically the leading
indexes on the stock market that reflect the
collective equities of the top companies that are
trading in the New York Stock Exchange. Of
course, all indices are calculated, most often it
is a weighted average of the current value of a
company's stocks.
Brokers chose to trade indices instead of
individual shares because indices give you
outlooks on the international stock market. This
is because when you trade indices, it gives you
an understanding of the conditions of the
companies and their stocks.
How to trade indices
2
Some of the key reasons to indices trading are
that they can be traded long or short and they
are a great portfolio diversification. In order
to trade indices, you first have to find an
index that you are comfortable with. It is
important that when choosing a stock index to
trade, you have to choose one that you are sure
about and that you may have prior knowledge of.
It's best to rely on news, analysis and
self-research. Market news and research help you
know market trends, to spot potential trading
opportunities and to recognise favourable trade
patterns within your chosen market. The indices
trade type that you choose at the end of the day
usually depends on the end goal of your trading
strategies.
The next thing you have to do is to choose
whether to spread bet or trade CFDs (Contract
for difference). Choosing the right type of trade
is essential as there are major differences
between spread bet or CFDs and that may influence
your trading decisions. Trading indices on the
online market is one of the methods to speculate
some of the world's highest financial markets and
to keep a handle on some of the top stock
trading markets.
3
When you feel comfortable enough with your
findings and you know that you have settled on
the right trading opportunity for your situation
and chosen index, you will need to decide which
direction you will be trading in. This means
that you have to decide whether to buy which is
to go long, or to sell which is to go short.And
the good thing about the CFD trading is that it
allows you to profit from the falling market as
well as the rising market for much bigger
flexibility.
Note that when you are placing your trade, it is
essential that you always act to protect
yourself from making trades that lead to losses
that are greater than you can handle. Some
trading companies offer smart risk management
tools that reduce losses and warn you against
them by limiting orders and granting free
guaranteed stops on some of the selective
markets. Always keep in mind that
4
picking a trade size that is bigger than your
budget will over-leverage your account, and
remember that the stock market can be
unpredictable so ensure that you always protect
yourself against excessive losses so as to ensure
your long term success even if losing sometimes
is inevitable, you should always do your best to
avoid it.
Usually, the final step is to monitor and close
your trades. Once a position is opened on your
chosen indices, you have to ensure that you stay
on top of all market movements so as to lock in
profits and minimise any potential loss. Some
mobile applications exist just for you to monitor
your position on the market while on the
go.Plus, you even get alerts, that way, you can
stay on top of all the market movements and this
helps you make better trading decisions.