Indices
Stock market indices express the average price movement of a bundle of stocks; they never bear the risks of a single company. These indices are easier to predict, and their volatility level is higher. The main reason being market price of stocks can experience significant ups and downs on the news related to this company or on certain reports, either bringing profits or losses to involved traders, depending on their event forecast. But the retail part of this market is not about owning shares in an industrial giant; it’s about earning money on these stocks’ market fluctuations with the lowest risks possible.
- Higher Profit Potential. As CFD allows for buying and selling indices without prior investment in stocks, you can benefit from both the falling and rising of the stock market if you predict the direction of its movement correctly.
- Better margins and leverage
- Traders need to invest a fraction of the total cost of a contract, while reserving the potential to gain larger returns. Leverage, however, also has the power to amplify losses.
- Greater Liquidity and Volatility. Indices are highly liquid and volatile. As they represent a wider market or sector, they are considered good financial health indicators for these industries.
- Lower Costs and Spreads. Trading indices as CFDs is less costly than trading the underlying index, with similar scope for profits. Moreover, 20Trade provides the lowest spreads on indices in the industry.
- Greater Exposure. Indices provide a large exposure to the overall market, without stock-specific risks. You get to track the movement of highly tradable stocks with good track records.
- Diversification of Portfolio. A good risk management tool, as the value of the index is the average of all entities in the group. The risk of losses is also lower because the volatility level differs from traditional stock trading.
- Both Long and Short Position Trading. Unlike some stocks, indices can be traded both long and short, providing more opportunities for profit.
