What is stock index trading?
A stock index represents the top shares from a particular exchange. For example, the FTSE 100 represents the largest 100 companies traded on the London Stock Exchange. Other stock indices include Dow Jones and S&P (US), DAX and CAC (Europe), and Hang Seng and Nikkei (Asia-Pacific).
Indices provide the best way to gauge the performance of an industry, sector or an entire country’s stock market. If, on average, the share prices of the companies making up the index go up, the index will rise with them. And if they fall, it will drop.
Indices cannot be traded directly, as they are representations, rather than products in their own right. Instead, investors trade indices through derivatives such as options, spread bets and CFDs - stock indices are the most popular form of CFD trading.
Learn more about options, spread betting and CFDs and their potential risks.