Compare the Best Indices Brokers

If you are thinking about trading indices and want to learn more or need an indices broker, then this quick guide will help you. Trading indices is a great way of trading a collective group of stocks without having to analyse each individual company stock.

This quick guide will explain what indices trading is, how it works and compare some of the leading indices brokers that we would recommend using if applicable. Of course, the final decision is always yours – we just try and point you in the right direction! All index brokers listed are fully regulated.

Compare The Top 5 CFD Index Brokers:

Broker     Official Site   Max. Leverage Regulations Min. Deposit    Spreads From Review
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200:1 $0 0.14 (Fixed)
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500:1 $100 From 0 pips
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500:1     $200 From 0.1 pips
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400:1 $100 From 0.9 pips
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400:1   $100 From 0.5 pips
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What is an Index Broker?

An index or indices broker is a company that provides access to stock indices, such as the DAX, Wall St 30, Australia 200 and UK100, via their online trading platform. There are a few different types of brokers that can provide an indices trading service, including:

CFD Index Brokers

When you trade stock indices with a CFD broker, you are speculating on the price movement of an index, utilising leverage. Leverage means that a trader only needs to deposit a small % of the total value of the index they are going to trade, which increases their exposure to that particular index/ trade. When you trade CFDs, you never own the underlying asset, instead, you are purely speculating on its price movement.

Spread Betting Index Brokers

Indices trading using a spread betting broker is almost exactly the same as using a CFD broker, although there are two main differences. First, spread betting is tax-free in the UK, whereas CFD trading is not. Secondly, when you spread bet, you are trading in your account’s base currency, whereas on a CFD account, you are trading on the product’s underlying currency, i.e. you would be trading in USD per point if you were trading the Wall St 30 index, even if you have a GBP account with your CFD broker.

Index Future Brokers

Brokers that offer index futures are usually providing this service to financial businesses (to hedge) and retail speculators. An index future allows a trader to buy or sell an index at a specific date in the future, usually on a quarterly basis. A index futures broker will provide access to exchanges such as the CME or LSE.

Index ETF Brokers

Trading indices through an ETF broker can typically be made through an investment platform or through a stockbrokers trading system. Index ETF trades are placed through an exchange as they are like shares and need to be purchased, rather than speculated on.

What Are Stock Indices?

A stock index is a selection of stocks that are listed on a particular exchange and grouped together to track the performance of those combined assets. Essentially, an index is a basket of assets that are intended to replicate a certain area of the market. For example, the Australian 200 index (or ASX 200) measures the top 200 companies in Australia by market capitalisation. If the index moves down, it means that some stocks within the index are performing badly, or worse than those that are performing well.

The world’s most popular indices are the S&P500, the Nadaq100 & the Dow 30 in the US, the DAX 30 in Germany, the UK100 in the UK, the Nikkei 225 in Japan and the EURO STOXX 50in Europe.

Some Benefits of Trading Indices

Do not rely on just one company

As the price of an index is made up of multiple stocks, you are not relying on one single company to make you a profit. Also, as you are trading a basket of stocks, it is considered less risky or volatile than investing in several stocks, individually.

No detailed stock analysis is required

If you invest in an index, you do not need to go into a detailed stock analysis on each and every stock you are interested in. This makes it far easier to make quick, smart trading decisions, rather than going cross-eyed with individual analysis.

Leverage

By using an online broker to trade indices, you can start with much lower capital requirements than traditional stock trading, where you have to pay the full amount. Trading using a CFD broker, for instance, means you will be making trades utilising leverage and only need to deposit a small amount to access higher trade sizes.

Profit in rising and falling markets

Trading a derivative product like CFDs means you can speculate on the price movement of an index, either by going long and buying, or by going short and selling the market. This adds incredible diversity to trading the world’s financial markets!

Checklist: Is My Broker Safe To Trade With?

Before you open an account to trade indices, you must ensure that you have followed the checklist below to ensure you are going to be trading with a reputable and safe broker.

Read lots of reviews

Get on the internet and do some researching – what are others saying about the broker you are considering? Is it good, bad or indifferent? If you see one or two negative comments, do not rule them out immediately as long as there are plenty of other positive comments. Of course, use discretion and be wary of brokers that have a lot bad publicity.

Ownership

Again, do some research and find out who owns the brokerage. Is it privately owned, and if so, by whom? Is it publicly listed, and if so, where? Also, how long has the company existed for?

Regulatory licences

Most brokers will be regulated to some degree but knowing which regulatory licences they hold is critical. If a broker is unregulated, do not go near them! If they are regulated but only by an offshore jurisdiction, like the Bahamas, Vanuatu, BVI, Saint Vincent and the Grenadines etc., then we would urge caution. Look for a broker that holds at least one Tier-1 regulator like ASIC, FCA, MAS etc.

Customer Support

The people who are ‘the face of the company’ often gives a great insight into how well a business is run and the people behind the firm. You should expect first-rate customer support from your broker and nothing less. If you find a broker’s customer support team rude or unhelpful, this is often a sign you are trading with a troubled broker. Search for an online broker that offers friendly and helpful 24/5 support across email, phone, and live chat.

Some Risks of Trading Indices

Large losses

This is the most concerning aspect of online trading – losing your hard-earnt money. Please only ever trade with money that you are prepared to lose and remember that an estimated 70-80% of people lose money trading.

Complexity

Online trading is a complex investment tool and you should not take it lightly. Ensure you have done a heap of research and spend hours on a test demo account before proceeding to trade on a live account.

Mental health

Trading indices and other derivative products can be extremely stressful and hamper your mental state of mind. If you feel like your mental health is deteriorating due to trading then you must stop immediately and seek expert help on the matter.

What is Indices Trading?

Index trading or indices trading is trading a stock market index, such as the FTSE 100, Australian 200, S&P 500, Wall St 30 and the DAX (Germany 30). Trading indices is one of the most popular types of trading around the world, both intraday and longer term.

 

What Are The Most Popular Indices To Trade?

The most popular indices traded, by volume, are the DAX, the FTSE100, S&P500 and the Wall St 30 (the DOW).

The DAX (German 30)

This index tracks the top 30 publicly-listed companies in Germany and includes companies such as Adidas, BMW, Deutsche Bank and Volkswagen.

The FTSE 100 (UK100)

This index tracks the largest 100 companies in the United Kingdom and is regarded as a benchmark of the UK economy.  It includes companies such as AstraZeneca, Barclays, BP and Vodafone.

S&P 500 (US500)

The S&P 500 focuses on the biggest 500 publicly-listed companies in the US. The S&P 500 index is one of the most heavily traded indices worldwide.

The DOW (US30)

The Wall St 30 index is based on the top 30 industrial stocks in the USA and includes companies like Amazon, Apple, Visa and Walmart.

Other popular indices include:

  • Nasdaq (Composite and Nasdaq 100)
  • CAC 40 (France 40)
  • Euro Stoxx 50 (Euro 50)
  • Japan 225 (Nikkei 225)
  • Hong Kong (Hang Seng Index)