Index trading is the buying and selling of a specific stock market index. Investors will guess on whether the price of an index will rise or decline, which will decide whether they will purchase or sell. Because an index reflects the performance of a group of stocks, you will not be purchasing an actual underlying stock, but rather the average performance of the group of stocks. When the price of shares for the companies inside an index goes up, the index’s value increases. If the price instead falls, the value of the index will drop.

You have two options when trading indices online: index cash CFDs and index futures CFDs. The fundamental distinction between the ‘cash’ and ‘futures’ markets is that the ‘cash’ market does not have an expiry date The ‘futures’ market, on the other hand, has an expiry date, which is often referred to as a ‘rollover.’ A futures contract is effectively an agreement between the buyer and the seller on the price that the buyer must pay at a paid future date.

Trading indices enables you to speculate on a group of shares for a fraction of the cost of trading them individually. One may get exposure to an entire sector or economy at once. You may also protect yourself against a drop in the value of your stock portfolio.