Indices Trading Canada

Indices Trading Canada
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INDICES

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Using CFD Indices, traders in Canada can now access the world's largest stock markets. Indices are a market index that represent a segment of a particular financial market. All stock exchanges across the world have a benchmark stock index that is often used to gauge price movement and future market performance.

FP Markets offers Indices trading across all trading platforms including MetaTrader 4, MetaTrader 5, and Iress. Indices are an effective measure of the overall performance of a particular stock market and allow Canadian traders to invest in a market, or segment of a market, rather than individual stocks. Indices are also less volatile as their price fluctuations are not as extreme as a single stock.

Trading the NASDAQ and NYSE is no longer limited to residents of the United States. FP Markets bring Wall Street to your doorstep as you can trade Indices CFDs including the US100 (NASDAQ 100), US500, and US Dollar Index. Within the same trading platform, traders in Canada can then access other markets such as the Australian Stock Exchange (ASX) and Hong Kong Stock Exchange.

There are a number of advantages when trading Indices CFDs with FP Markets. Not only do we use DMA Pricing, our relationships with top-tier liquidity providers ensure trading costs are kept to a minimum. As a leveraged product, traders are able to gain greater exposure with a smaller initial outlay. Combined with cutting edge technologies, we are able to deliver optional trading conditions that cater for all trading needs.

What are the benefits of
Indices trading?

  • Trading CFD indices allows you to speculate on the price movement of an underlying index without actually having physical ownership of the asset.

  • The ability to trade in both bullish and bearish prices creates additional trading opportunities. Open long and short positions.

  • Gain increased exposure through leveraged CFD products

  • Advanced trading platforms such as MetaTrader 4, MetaTrader 5 and Iress offer access to live streaming prices, cutting-edge technical analysis and charting tools.

  • Real-time pricing and ultra fast trade execution.

    Ability to invest in a market or market segment rather than just individual stocks.

    Ideal for portfolio diversification and hedging strategies.

    Lower trading costs

& Cryptocurrencies

FP Markets offers much more than Indices trading! We also offer Forex, Commodities,

& Cryptocurrencies

What is the Best Platform to Trade Indices?

Trade Indices on MetaTrader 4, MetaTrader 5 & WebTrader offering desktop and mobile versions.

MetaTrader 4 (MT4) is the world's most popular trading platform. Its easy-to-use and customisable interface makes it ideal for trading Indices. It also provides Canadian traders with flexibility as it is available on the following platforms: Windows, WebTrader, Mac, iOS and Android.

MetaTrader 5 (MT5)

Customisable interface and alerts


Traders Toolbox - suite of 12 online trading tools


One-click trading

MarketWatch


Live price streaming on Live accounts and Demo accounts with 128-bit encryption ensuring secure trading


Expert Advisors (EAs)


Customisable alerts


Compatible with iOS, Android and Mac devices

Are there more platform options?

We recommend MetaTrader 4 for Indices CFDs but also offer a wide range
of products on our MetaTrader 5 and Iress platforms.

Why Trade Index CFDs with FP Markets?

Accessible

& Affordable

Benefit from our low-cost, competitive margins, starting at just 1%.

Convenient

Contract Size

With an exposure of $1 per point movement, cash index contracts allow you to precisely tailor your position size according to your risk management profile.

Zero

Commissions

The cost of cash index
contracts is built into the
bid-offer spread.

Hedge

Risk

Diversify your portfolio
by trading CFD indices
and hedge your risks.

index-trading

What is Index Trading?

Stock market indices are used to measure a specific stock market exchange, or specific subset of a market such as technology or financial services. They represent the value of a group of stocks which can be used to compare current price levels with historical data. Indices can be calculated using a number of methods including market capitalisation, price weighting and equal weighting.

For instance, S&P/TSX Composite Index represents roughly three quarters of the market capitalisation on the Toronto Stock Exchange which includes about 250 of Canada's largest companies. Similarly, the ASX 200 tracks the share price of the top 200 companies listed on the Australian Securities Exchange (ASX), while the Hang Seng is the Hong Kong equivalent.

There are several reasons why people trade Indices. Tracking the performance of all the stocks on a particular exchange is impossible. Instead, traders use Indices to track the performance of a particular exchange or segment of it. Indices are less volatile, can provide steadier growth, and can often be used as part of a risk management strategy.

An Example of Indices CFD Trading

For this example we will use the 'Dow Jones Industrial Average Index', also known as the US30 as the underlying asset. Let us suppose that the US30 is trading at:

us30-bid-ask-price

You decide to buy 5 contracts of US30 because you think that the US30 price will rise in the future. Your margin rate is 5%. This means that you need to deposit 5% of the total position value into your margin account.

In the next hour, if the price moves to 36000/36010, you have a winning trade. You could close your position by selling at the current (bid) price of US30 which is 36000.

In this case, the price moved in your favor. But, had the price declined instead, moving against your prediction, you could have made a loss. This continuous evaluation of price movements and resultant profit/loss happens daily. Accordingly, it leads to a net return (positive/negative) on your initial margin. In the loss scenario where your Free equity, (Equity - Margin) falls below the margin requirements (8986), the broker will issue a margin call. If you fail to deposit the money, and the market moves further against you, when your equity reach the 50% of your initial margin the contract will be closed at the current market price, known as "stop out".

As indices are more stable and include the largest companies on an exchange, they provide the added benefit of leverage. This means that even the smallest of margin such as a single pip (percentage in point), can provide a significant return for investors.

short-long-bid
If the price
of AUD/USD		 To You could Gain or Lose
for a Long Position		 Resulting in a Return
of the Initial Margin
Rises by + 1% 36303.44/36103.44 USD 1797 20%
Declines by -1% 35584.56/35594.56 USD -1797 20%

Benefits of Index Trading

Indices are often used to gauge overall market sentiment. They can also act as benchmarks against individual stock portfolios. One of the benefits is that traders can gain exposure to a particular stock market or a specific sector within a market. Rather than invest in 10 or even 50 tech stocks, a trader may opt to instead invest in the NASDAQ 100 - an index that is made of the 100 largest tech companies in the United States.

By investing in such an index, the risk of the performance of a single stock impacting an entire portfolio is reduced. Indices are also a straightforward way to invest as they do not require extensive research on a large group of individual stocks. Instead, traders can invest in an entire segment such as mining or banking.

The presence of a large number of stocks means that the price fluctuations of indices are smoother. They are not exposed to volatility from a single stock and can also be used as a hedging tool. Particular segments are renowned for being correlated or negatively correlated with others.

The ability to trade in both directions make Indices CFDs unique. The option of trading in both rising and falling prices creates additional trading opportunities that do not exist in most financial markets. Portfolio diversification is a common strategy in a large number of trading plans and one that indices can help serve. Canadian traders should consider this when developing a trading plan.

6 Reasons to Choose FP Markets

An Australian Regulated Forex broker

Globally Regulated

Segregated client funds
& regulation in Australia

Tighter Spreads Market

Market leading spreads from
0.0 pips, 24/5

Faster Execution

Low latency
execution under 40ms

Advanced Platforms

MT4, MT5 & WebTrader with superior client portal

24/7 Multilingual
Customer Support

Award-winning support &
& personal account managers

Established in 2005

15+ years
trading experience

CFD Indices Spreads

Symbol Product   Standard A/c
    Min Avg
AUS200 Australia 200 Index vs Australian Dollar Cash 1.3 2.06
CHINA50 China A50 Index vs US Dollar Cash 3.5 9.23
EURO50 Euro 50 Index vs Euro Cash 1.6 2.31
FRA40 CAC 40 Index vs Euro Cash 1.15 3.84
GER40 German 40 Index vs Euro Cash 0 2.66
HK50 Hang Seng Index vs Hong Kong Dollar Cash 3.6 9.79
INDIA50 NIFTY 50 Index vs Dollar Cash 10.3 14.52
JP225 Japan 225 Index vs Japanese Yen Cash 6.1 7.48
SPA35 Spain 35 Index vs Euro Cash 2.6 6.6
UK100 UK100 Index vs Great Britain Pound Cash 1.3 2.32
US100 US Tech 100 Index vs US Dollar Cash 0 1.5
US30 US 30 Index vs US Dollar Cash 0 2.03
US500 US 500 Index vs US Dollar Cash 0 0.51
USDX USD Index Basket vs US Dollar Future 0.05 0.05
VIX VIX Index Cash vs US Dollar Future 0.1 0.11

Direct Market Access (DMA) Indices CFD Spreads

Available Indices
NASDAQ 100 E-Mini DJIA E-Mini (CBOT) Mini SPI 200
Nikkei 225 (CME) DAX Index SPI 200
S&P 500 E-Mini EURO Stoxx 50

Dividends Adjustments

Traders need to be aware of the impact of open positions on a dividend date. If you hold an open long position on an Index CFD that pays a dividend, you will be entitled to an amount equal to the amount based on the number of contracts you hold after the close of the business day before the ex-dividend date. If Company XYC paid a dividend of 10 cents per share while your position was open, you would be entitled to a positive dividend adjustment of $500 (5000 x 10 cents).

Conversely, if you hold an open short position in an Index CFD which pays a dividend, you will be required to pay an amount based on the number of contracts you hold after the close of the business day before the ex-dividend date. This adjustment may be made either as a cash adjustment into your trading account or included into the end of day swap rate.

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How are Stock Market
Indices Calculated?

Financial experts and investors use a range of different methods to calculate Stock Indices. Some of the more popular methods are:

Market Capitalisation
Weighted Method

Ranks companies by market capitalisation which is calculated by multiplying the number of shares by the current share price. The S&P 500 and ASX 200 are major Indices that employ this method.

The Equal Weighted
Method

As indicated by its name, equal weighting is given to all the stocks based on their returns. The returns on each stock are calculated, added together and then divided by the total number of stocks on the Index.

The Price Weighted
Method

A weighted average based on share price. Stocks with a higher share price are given greater weight, irrespective of market capitalisation. Interestingly, one of the largest indices in the world, the Dow Jones, uses this method.

What are the Most
Traded Indices?

FP Markets offers trading in more than a dozen of the world's largest,
and most trades global Indices.

Dow Jones: The Dow Jones Industrial Average often referred to as ‘the Dow’, is a price-weighted index of the 30 largest companies listed on stock exchanges in the United States. Salesforce, Boeing and Walt Disney are among the companies that make up the index.

S&P 500: The Standard & Poor's index is made up of the 500 largest US stocks based on market capitalisation. It includes heavily traded companies such as Amazon, Apple, Microsoft, Netflix, and Walt Disney.

FTSE 100: Is made up of the 100 largest stocks by market capitalisation on the London Stock Exchange. Commonly referred to as the 'Footsie', recognisable companies such as HSBC, Lloyds, Barclays, BP, and BHP feature prominently.

ASX 200: Maintained by Standard and Poor's, the ASX 200 is also weighted using market capitalisation. It is made up of the largest companies in Australian including Woolworths, Rio Tinto and all four major Australian banks.

How to Identify What
Moves an Index’s Price

Several factors which can influence
Indices markets

Movement in its Constituents: A significant price movement in the stocks included in a particular index is the biggest reason for a change in the value of the index. This is particularly the case if a single stock makes up a disproportionate amount of the index.

Economic News and Data: There is a constant stream of critical economic news and data that is released. This can be related to inflation, unemployment, interest rates, retail sales, imports and exports. The best way to keep track of this is using FP Markets

.

Political News: This can be very topical and carries greater significance when major elections are taking place. Perceived changes in policies and potential impact on trade relations are two of the factors to consider as they may impact a range of financial markets including stocks and forex.

Changes in Composition: The addition or removal of stocks from an index can cause fluctuations in its value. There are generally no rules relating to the rebalancing of an index which is why Canadian traders should keep a close eye on this.

Sector Specific: There are a wide range of sector specific Indices such as the NASDAQ 100 which is exclusively made up of technology companies. News relating to the tech space will have a greater impact on the NASDAQ 100 than upcoming reports on the mining sector.

Why Trade Indices

Trading opportunities: Indices CFDs, provide a greater amount of trading opportunity as investors can capitalise on price fluctuations in both directions.

Hedging: Risk management is critical to the success of forex and CFD trading. Indices can be particularly useful for hedging strategies as you can invest in an index of a particular sector. This is useful if you wish to minimise the risk exposure of a portion of your portfolio that may be facing high levels of volatility.

Diversification: Indices CFDs allow traders to gain exposure to global markets without having to invest in individual stocks. Using indices, traders in Canada can invest in global markets including the DAX 30 (Germany), Hang Seng (Hong Kong), or the FRA 40 (France).

Leverage: As a leveraged product, traders can benefit significantly from minor price fluctuations. The ability to trade using leverage is one of the key attractions of CFDs. Traders can open positions of a much higher value than the funds available in their trading account. Read our 'Guide to Leveraged Trading'.

How to Trade Indices

The easiest way to trade Indices CFDs is via an online trading platform. These financial instruments allow traders to speculate on Indices without owning the underlying asset. We offer a range of Account Types across our MetaTrader 4, MetaTrader 4, and Iress trading platforms. For further information, check out our 'Beginner's Guide to Index Trading'.

.

Indices Trading Canada
- FAQ

Trading Costs: With CFD trading you do not take ownership of the underlying asset. This reduces the overall costs associated with trading.

Less Volatile: As they are made up of a number of different stocks, Indices are not as susceptible to sharp changes in value. Consequently, the impact of volatility is not as significant when trading indices.

Leveraged Trading: This is a major benefit of CFD trading as it enables traders to gain larger exposure to Indices by depositing only the margin required to open the trade. This means that you do not need to have the full value of the position in your trading account, but only the margin.

Find out more about the Benefits of Indices CFDs and how to trade them.

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