An index (plural: indices) is a benchmarking system used to gauge trends in the stock market. Each index groups together many (up to hundreds of) stocks that share certain common characteristics. Some of the common characteristics used to group companies into a particular index are:

- Field of business, e.g. agriculture or technology
- Geographical location
- Recent activity

Therefore, the value of that index is used to convey the best approximation in that particular field of trade. Major national indices are a bellwether of overall market sentiment.

What are Indices in Trading?

Among the most important indices in world trade we can find:

- Dow Jones Industrial Average (The Dow) – 30 large companies listed in the U.S.
- S&P 500 Index (S&P) – 500 large companies listed in the U.S.
- Nasdaq Stock Market (The Nasdaq) – second-largest U.S. stock market after the NYSE
- FTSE 100 Index (The FTSE/Footsie) – 100 large companies listed on the London Stock Exchange
- Nikkei 225 (The Nikkei) – 225 large, publicly-owned companies on the Tokyo Stock Exchange
- DAX – 30 major blue-chip German companies on the Frankfurt Stock Exchange
- CAC 40 – 40 most significant companies on Euronext Paris, Europe’s second-largest exchange
- S&P/ASX 200 (ASX200) – 200 companies listed on the Australian Securities Exchange

While the number of companies included on one index rarely ever changes, the companies on the index are reviewed, usually on an annual basis. Companies on an index that do not satisfy the criteria as well as companies not on the list may be replaced by them.

The values of trading indices are not calculated just as an average value of the stocks they contain. Instead, a weighted system is used to portray the health of the fields they represent most accurately. Also, the same stock may be included in multiple trading indices if it satisfies the relevant criteria.

Trading indices are popular with new investors as well as experienced traders, because it allows them to take cues from the economy or a particular industry. Trading specific stocks, on the other hand, requires a more in-depth understanding of the internal and external dynamics of the company.

Another advantage is that the inherent broad-based valuation is insulated against sharp falls in the value of any individual stock. This makes trading indices a safer investment compared to trading in specific listed companies.

Learning how to trade indices is not difficult but knowing the best indices to trade may be. You need an experienced and reliable platform like Horizon Gold to get started.

How to trade CFDs on Indices?

The value of stocks on any exchange fluctuates during trading hours. Consequently, the value of the trading indices on which those stocks are included also fluctuates. The value of the index must rise above the value at which you entered the trade for you to make a profit on your investment.

Successful indices trading depends on at least a basic knowledge of how the economy is doing on the whole and the index in particular. A CFD (Contract for Differences) is perhaps the simplest way to enter the indices trading market.

A CFD is an agreement between two parties to settle the difference between the opening value and closing value of a trade in cash. CFDs on indices require no physical exchange of goods or securities and are based entirely on the movement of the index.

For example, a tech stocks index may be expected to rise upon the release of cutting-edge technology that promises to be a game changer. In this case, getting into the CFD market for tech indices early may pay big dividends even in the short-term.

On a broader base, the NASDAQ and Dow are at record or near-record highs because the current US economy (December 2019) is adding jobs and lowering unemployment at record rates. A CFD centring on these US indices may also be a good investment in the current environment.

Advantages of Indices Trading on Horizon Gold

Any investment of your cash and resources should be made after appropriate deliberation and even then, only with a reliable trading partner like Horizon Gold.

Horizon Gold gives you the option to trade on indices from across the board and all over the world. We offer you a trifecta of reliability with instant updates from world markets at your fingertips, exclusive trading tips and a safe, secure platform.

Trade on indices 24 hours a day, 5 days a week, whenever a market is open anywhere in the world. Our CFD options allow you to make an investment and then sit back as it matures without the need for constant monitoring. Use our diverse range of trading tools to stay ahead of the curve and make the right decision at the right time.

With Horizon Gold by your side, the market is at your feet.