Trading Stock Indexes
Stock indexes are a measure of the performance of the biggest companies in a stock exchange. A stock index is also known as a stock market index. There are several types of stock market indexes. Understanding the function that a stock market index serves will help the trader understand how to trade the stock index.
Best Brokers With Stock Indexes
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At FXCC, traders can access competitive spreads on major indices, including the Dow Jones, NASDAQ, and S&P 500. A notable limitation is the absence of individual stocks, which puts FXCC at a disadvantage compared to competitors like CMC Markets, known for offering thousands of shares.
Instruments Regulator Platforms CFDs, Forex, Indices, Commodities, Crypto CySEC MT4, MT5 Min. Deposit Min. Trade Leverage $0 0.01 Lots 1:500 -
A vast array of global shares and indices are accessible. Depending on your location, trading IPO shares and ETFs on the MT4 platform is also possible. A modest 0.1% commission applies to US shares, with various analytical tools provided to keep you informed on market developments.
Instruments Regulator Platforms Currencies, Cryptocurrencies, Stocks, Indices, Metals, Oil and Gas, Commodity Futures and InstaFutures BVI FSC MT4, MT5 Min. Deposit Min. Trade Leverage $1 0.10 of the lot (0.0001 of market lot for Cent.Standard and Cent.Eurica) 1:30 for retail clients, 1:500 for professional -
FxPro provides a robust range of stock CFDs with access to over 2,000 equities from major US and European exchanges, featuring companies such as Tesla and Apple. Additionally, the broker is expanding its offerings through BnkPro's e-money and investment products.
Instruments Regulator Platforms CFDs, Forex, Stocks, Indices, Commodities, Futures, Spread Betting FCA, CySEC, FSCA, SCB, FSA FxPro Edge, MT4, MT5, cTrader, AutoChartist, TradingCentral, DupliTrade, Quantower Min. Deposit Min. Trade Leverage $100 0.01 Lots 1:30 (Retail), 1:500 (Pro) -
FOREX.com offers a variety of US, EU, and UK stock CFDs with spreads as tight as 1 point. Traders can explore both established brands and new IPOs, enhancing portfolio diversification opportunities. US stocks are available starting at 1.8 cents per share.
Instruments Regulator Platforms Forex, CFDs, Stocks, Indices, Commodities, Futures, Options, Crypto NFA, CFTC, CIRO, FCA, CYSEC, ASIC, SFC, FSA, MAS, CIMA MT4, MT5, TradingView, eSignal, AutoChartist, TradingCentral Min. Deposit Min. Trade Leverage $100 0.01 Lots 1:30 -
IG provides access to over 13,000 shares for trading and investment, surpassing most rivals in the number of listed firms. The broker stands out with its zero commission policy on US shares. Additionally, out-of-hours trading unlocks more than 70 shares, alongside popular ETFs and trusts, even when markets are shut. They have also introduced an AI Index, highlighting opportunities in leading US firms specialising in artificial intelligence and machine learning, like Nvidia.
Instruments Regulator Platforms CFDs, Forex, Stocks, Indices, Commodities, ETFs, Futures, Options, Crypto, Spread Betting FCA, ASIC, NFA, CFTC, DFSA, BaFin, MAS, FSCA, FINMA, CONSOB, AFM Web, ProRealTime, L2 Dealer, MT4, TradingView, AutoChartist, TradingCentral, ProRealTime Min. Deposit Min. Trade Leverage $0 0.01 Lots 1:30 (Retail), 1:222 (Pro) -
Eightcap provides access to over 590 shares from the US, Australia, and Europe, alongside key indices like the Dow Jones and FTSE. The platform's Labs feature superb educational resources, such as the guide on managing stock market volatility. Additionally, Capitalise.ai enables traders to automate strategies using clear English commands. However, Eightcap lacks fractional shares for budget-conscious traders, a feature offered by competitors like XTB.
Instruments Regulator Platforms CFDs, Forex, Stocks, Indices, Commodities ASIC, FCA, CySEC, SCB MT4, MT5, TradingView Min. Deposit Min. Trade Leverage £100 0.01 Lots 1:30 -
eToro provides access to a vast range of shares from Europe, the US, and more, including Dubai's leading stocks from 2024. Traders can either operate independently or engage with eToro's vibrant community of millions. Long-term investors might explore the broker's Smart Portfolios, featuring thematic collections such as Big Tech.
Instruments Regulator Platforms CFDs, Forex, Stocks, Indices, ETFs, Smart Portfolios, Commodities, Futures, Crypto, NFTs FCA, ASIC, CySEC, FSA, FSRA, MFSA, CNMV, AMF eToro Web, CopyTrader, TradingCentral Min. Deposit Min. Trade Leverage $50 $10 1:30 -
City Index provides access to over 4,700 shares from major stock exchanges through CFDs and spread betting, featuring prominent companies such as Tesla and Apple. Traders can also engage in pre-market and after-hours trading on more than 70 US stocks. Additionally, the platform excels in offering indices aligned with emerging consumer interests, like AI, NFTs, and ESG criteria.
Instruments Regulator Platforms CFDs, Forex, Stocks, Indices, Commodities, Crypto, Futures, Options, Bonds, Interest Rates,ETFs,Spread Betting FCA, ASIC, CySEC, MAS Web Trader, MT4, TradingView, TradingCentral Min. Deposit Min. Trade Leverage $0 0.01 Lots 1:30 -
Plus500 provides a comprehensive selection of shares through CFDs across UK, US, and European markets. In 2025, this includes new offerings in quantum computing and AI sectors, featuring companies like IonQ, Rigetti, Duolingo, and Carvana. Unique prospects in the ESG and cannabis sectors set Plus500 apart from other platforms. Traders also have access to over 30 indices, with leverage options reaching up to 1:20.
Instruments Regulator Platforms CFDs on Forex, Stocks, Indices, Commodities, ETFs, Futures, Options FCA, ASIC, CySEC, DFSA, MAS, FSA, FSCA, FMA, EFSA WebTrader, App Min. Deposit Min. Trade Leverage $100 Variable 1:30 -
Axi has broadened its selection of stock CFDs, offering options in key markets such as the US, UK, Europe, and Hong Kong. However, it still does not match the market access available through leading firms. Axi Academy is particularly noteworthy, with its Share CFDs Trading Course 101 serving as an excellent introduction for newcomers.
Instruments Regulator Platforms CFDs, Forex, Stocks, Indices, Commodities, Crypto FCA, ASIC, FMA, DFSA, SVGFSA Axi Copy Trading, MT4, AutoChartist Min. Deposit Min. Trade Leverage $0 0.01 Lots 1:30
Types of Stock Indexes
This classification is not a standard classification, but is an attempt to help the trader to understand how these indexes function so as to understand how to trade them. Based on this therefore, indexes can be classified in the following ways:
a) Global Index: This is an index that measures the performance of several big corporations all over the world, irrespective of what countries these companies are domiciled. Examples of such exchanges are the MSCI World (formerly Morgan Stanley Capital International), which is an index that measures the performance of more than 6,000 stocks scattered all over the globe.
b) National Index: this is the index that measures the performance of companies located in a particular country. The national index measures the performance of a country’s stock market and by extrapolation, a country’s economy. Examples of some of the common national indexes are the Nikkei 225 (Japan), Hang Seng (Hong Kong), FTSE100 (UK), CAC40 (France), Zurich SMI (Switzerland), IBEX35 (Spain), SENSEX (India) and Tadwul (Saudi Arabia).
c) Specialized Index: Specialized indexes measure specific sectors of the market within a country’s exchange. An example is the Morgan Stanley Biotech Index which measures the performance of 36 Biotechnology stocks within the United States. Another example is the Wilshire REIT which is an index that measures the performance of the stocks of 80 real estate companies in the US.
For the purposes of this article, we will be discussing how to trade the national indexes, as these are the most straightforward indexes to trade and the ones you will most commonly find as tradable instruments on broker platforms.
Steps to Trading a Stock Index
In order to trade a stock index, the trader will have to open an account with a suitable broker or app. Today, traders can choose between hundreds of brokers that offer index-based CFDs or ETFs. Some examples of brokers that offer stock indexes as online trading instruments are as follows:
All brokers are required by law to know their customers, so traders are required to submit identification documents which prove their identity (international passport, drivers license and national ID card) and their place of residence (credit card statement, bank statement or utility bill). When these documents are submitted and approved, the account will be activated and the trader is ready for trading.
Leverage and Margin Requirements
Trading stock indexes requires more margin than forex trading because of the increased contract sizes to be traded. Many platforms will offer just the half contract (known as E-mini), so you will probably see E-mini Nasdaq, E-mini Dow, etc on your trading platform. However, traders who have more money to spare and who utilise brokerage platforms offered by banks such as Saxo Bank or MIG, will probably be offered the full contract. Whatever the case, the trader will need at least $20,000 to be able to trade stock index instruments comfortably. Some brokers offer watered down contract sizes, so you may be able to trade these index assets with as low as $2,000.
Trading Times
The parent exchanges of the stock index futures are usually open at certain hours of the day, during which the index assets experience their greatest volatility. This is similar to the forex market which is most active at certain hours of the day despite the 24-hour nature of the market. Traders should therefore pay attention to the times at which the parent exchanges are open for business.
Index Trading Strategies
Stock indexes can be traded by technical and/or fundamental analysis.
When trading with technical analysis, traders should understand that the parent markets are only open for certain hours of the day, even though the stock index futures themselves (which is what is offered for trading on the platforms) remain open for trading throughout the day. So traders must be conversant with the trading times of the parent exchanges as those are the times when there is maximum activity on the index assets. These are the times when there is maximum volatility and when traders have the opportunity to profit.
Technical analysis will involve the use of chart information and technical indicators to determine where the asset is headed. An example is this chart of the Xetra DAX30, showing a bullish continuation pennant pattern.
This is an example of a chart pattern being used as part of technical analysis in trading stock indexes.
The use of fundamental analysis in trading stock indexes involves being able to gauge market sentiment, because market sentiment is what will determine whether traders and investors will go on a stock buying spree, or whether they will ditch stocks for cash. Certain news items have a profound effect on the stock markets. These include employment reports (especially the Non-Farm Payrolls), manufacturing data, interest rate decisions and other country-specific news items. For instance, the Eurozone has been grappling with the sovereign debt crisis for quite some time and whenever there is talk of the state of the banking system in the affected countries, the major European stock indexes experience increased volatility.
In practice, trading stock indexes will require a combination of fundamental analysis and technical analysis. Looking at our chart example above, the fundamental driver for the Xetra DAX was the announcement by the European Central Bank that it would engage in bond buying as a means of limiting the effects of the sovereign debt crisis in the Eurozone. With this fundamental trigger, the bullish continuation pattern (pennant) provided a sound basis for a technical entry in the direction of the fundamental trigger.