CFD Indices Trading
CFD indices trading allows the speculation upon the performance of stock markets or industries as a whole. This article will discuss what indices are, what CFD trading is, top brokers and how to get started. Find out how to start trading CFD indices today.
Best CFD Indices Trading Brokers
- AvaTrade - AvaTrade's 1250+ leveraged CFD products span a wide range of asset classes including stocks, indices, commodities, bonds, crypto, and ETFs. You can speculate on underlying assets in the broker’s feature-rich web and mobile platforms with market-leading research tools to help discover opportunities.
- Deriv.com - You can trade CFDs on popular markets, including the broker's exclusive synthetic indices which are available 24/7. There are plenty of charting tools available for technical traders, including over 20 indicators in the Deriv Trader platform. New users can also open an account and start trading CFDs instantly.
- Pepperstone - Pepperstone maintains its position as one of the fastest and most dependable CFD brokers during our latest round of testing. With execution speeds averaging around 30ms and an outstanding fill rate of 99.90%, the broker ensures a seamless trading experience without requotes or dealing desk interference. It also provides ample trading opportunities across over 1,300 assets.
- XM - Day traders can speculate on leveraged CFDs with zero commissions, spanning popular markets including currencies, equities and commodities. Additionally, the MetaTrader platforms collectively offer dozens of advanced technical indicators built for short-term strategies.
- IC Markets - You gain access to over 2,250 CFDs, available for trading 24/5 across popular markets such as forex, commodities, indices, stocks, and bonds. Utilizing deep liquidity and advanced bridge technology, IC Markets ensures optimal conditions for scalpers, hedgers, and algo traders alike.
CFD Indices Trading Comparison
| Broker | CFD Leverage | Minimum Deposit | Minimum Trade | Regulators | Visit |
|---|---|---|---|---|---|
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1:30 (Retail) 1:400 (Pro) | - | 0.01 Lots | ASIC, CySEC, FSCA, ISA, CBol, FSA, FSRA, BVI, ADGM | Visit |
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1:1000 | $5 | 0.01 Lots | MFSA, LFSA, VFSC, BFSC | Visit |
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1:30 (Retail), 1:500 (Pro) | $0 | 0.01 Lots | FCA, ASIC, CySEC, DFSA, CMA, BaFin, SCB | Visit |
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- | $5 | 0.01 Lots | ASIC, CySEC, DFSA, FSC, FSCA | Visit |
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1:30 (ASIC & CySEC), 1:500 (FSA), 1:1000 (Global) | $200 | 0.01 Lots | ASIC, CySEC, FSA | Visit |
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- | $100 | 0.01 Lots | ASIC, FCA, xCySEC, SCB | Visit |
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1:30 | $50 | 0.01 Lots | CySEC | Visit |
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1:30 (Retail), 1:50 (Accredited Investor), 1:200 (Sophisticated Investor), 1:300 (Wholesale Investor), 1:400 (Professional Trader). Varies with jurisdiction. | $0 | 0.01 Lots | ASIC, FCA, MAS | Visit |
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1:2000 | $10 | 0.01 Lots | FSA, CySEC, FCA, FSCA, FSC, CBCS | Visit |
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- | $100 | 0.01 Lots | ASIC | Visit |
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1:200 (Retail), 1:500 (Pro) | $100 | 0.01 Lots | NFA, CFTC, CIRO, FCA, CYSEC, ASIC, SFC, FSA, MAS, CIMA | Visit |
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- | $50 | $10 | FCA, ASIC, CySEC, FSA, FSRA, MFSA | Visit |
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1:2000 | $10 | 0.01 Lots | IFSC | Visit |
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- | - | - | - | Visit |
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1:1000 | $20 | 0.01 Lots | - | Visit |
#1 - AvaTrade
Why We Chose AvaTrade
AvaTrade's 1250+ leveraged CFD products span a wide range of asset classes including stocks, indices, commodities, bonds, crypto, and ETFs. You can speculate on underlying assets in the broker’s feature-rich web and mobile platforms with market-leading research tools to help discover opportunities.
"AvaTrade offers the full package for short-term traders. There is powerful charting software, reliable execution, transparent fees, and fast account opening with a low minimum deposit."
- DayTrading Review Team
- FTSE Spread: 0.5
- GBPUSD Spread: 1.5
- Stocks Spread: 0.13
- Leverage: 1:30 (Retail) 1:400 (Pro)
- Regulator: ASIC, CySEC, FSCA, ISA, CBol, FSA, FSRA, BVI, ADGM
- Platforms: WebTrader, AvaTradeGO, AvaOptions, MT4, MT5, AlgoTrader, TradingCentral, DupliTrade
About AvaTrade
AvaTrade is a leading forex and CFD broker, established in 2006 and regulated across 9 jurisdictions. Over 400,000 users have signed up with the broker which processes over 2 million trades each month. The firm offers multiple trading platforms, including MT4, MT5, and a proprietary WebTrader. 1250+ financial instruments are available for day trading, alongside a comprehensive education center and multilingual customer support.
Pros
- AvaTrade is a heavily regulated and trustworthy broker with licenses from the ASIC, CySEC and more
- Automated trading is supported through MetaTrader Expert Advisors (EAs), as well as the AvaSocial and DupliTrade tools
- There's a great range of fee-free deposit methods, including bank wire, credit cards and popular e-wallets like Skrill
Cons
- Traders from the US are not accepted
- It’s a shame that there are no rebate schemes for serious traders looking for additional perks - CMC Markets would be a better choice here
- A high $2000 minimum investment is required to use DupliTrade, which will be out of reach for many beginners
#2 - Deriv.com
Why We Chose Deriv.com
You can trade CFDs on popular markets, including the broker's exclusive synthetic indices which are available 24/7. There are plenty of charting tools available for technical traders, including over 20 indicators in the Deriv Trader platform. New users can also open an account and start trading CFDs instantly.
"Deriv.com will suit day traders looking to make fast-paced trades using CFDs and multipliers with high leverage up to 1:1000. The broker is also the industry leader in synthetic indices, which simulate real market movements and are available around the clock. "
- DayTrading Review Team
- FTSE Spread: 0.5
- GBPUSD Spread: 0.5
- Stocks Spread: 0.07
- Leverage: 1:1000
- Regulator: MFSA, LFSA, VFSC, BFSC
- Platforms: Deriv Trader, MT5
About Deriv.com
Deriv.com is a low cost, multi-asset broker with over 2.5 million global clients. With just a $5 minimum deposit, the firm offers CFDs, multipliers and more recently accumulators, alongside proprietary synthetic products which can't be found elsewhere. Deriv provides both its own in-house charting software and the hugely popular MetaTrader 5.
Pros
- Traders can use multipliers between 1 and 30, with take profit, stop loss and deal cancellation parameters
- The free demo account is ideal for practicing short-term trading strategies and no registration is required
- Deriv continues to offer fast and reliable 24/7 support and the WhatsApp service is particularly convenient
Cons
- There's no loyalty program or rebate scheme for high volume traders
- The range of 100+ assets trails some competitors such as Quotex which offers 400+
- There are limited copy trading tools and analysis features compared to alternatives like IQ Cent
#3 - Pepperstone
Why We Chose Pepperstone
Pepperstone maintains its position as one of the fastest and most dependable CFD brokers during our latest round of testing. With execution speeds averaging around 30ms and an outstanding fill rate of 99.90%, the broker ensures a seamless trading experience without requotes or dealing desk interference. It also provides ample trading opportunities across over 1,300 assets.
"Pepperstone stands out as a top choice for day trading, offering razor-sharp spreads, ultra-fast execution, and advanced charting platforms for experienced traders. New traders are also welcomed with no minimum deposit, extensive educational resources, and exceptional 24/7 support."
- DayTrading Review Team
- FTSE Spread: 1.0
- GBPUSD Spread: 0.4
- Stocks Spread: 0.02
- Leverage: 1:30 (Retail), 1:500 (Pro)
- Regulator: FCA, ASIC, CySEC, DFSA, CMA, BaFin, SCB
- Platforms: MT4, MT5, cTrader, TradingView, AutoChartist, DupliTrade
About Pepperstone
Established in Australia in 2010, Pepperstone is a top-rated forex and CFD broker with over 400,000 clients worldwide. It offers access to 1,300+ instruments on leading platforms MT4, MT5, cTrader and TradingView, maintaining low, transparent fees. Pepperstone is also regulated by trusted authorities like the FCA, ASIC, and CySEC, ensuring a secure environment for day traders at all levels.
Pros
- Pepperstone boasts impressive execution speeds, averaging around 30ms, facilitating fast order processing and execution that’s ideal for day trading.
- Award-winning customer support is available via telephone, email or live chat with response times of <5 minutes during testing.
- There’s support for a range of industry-leading charting platforms including MT4, MT5, TradingView, and cTrader, catering to various short-term trading styles, including algo trading.
Cons
- Despite enhancements to its range of markets, crypto offerings are relatively limited compared to other brokers such as eToro, with no option to invest in real coins.
- There’s no simplified proprietary trading platform, nor are there any social trading features, which could be a disadvantage if you are new to day trading.
- Pepperstone does not support cTrader Copy, a popular copy trading feature built into the excellent cTrader platform and available at alternatives like IC Markets.
#4 - XM
Why We Chose XM
Day traders can speculate on leveraged CFDs with zero commissions, spanning popular markets including currencies, equities and commodities. Additionally, the MetaTrader platforms collectively offer dozens of advanced technical indicators built for short-term strategies.
"XM is one of the best forex and CFD brokers we have tested. The flexible account types will suit a variety of short-term trading styles while the $5 minimum deposit and smooth sign-up process make it easy to start trading."
- DayTrading Review Team
- FTSE Spread: 1.5 pts
- GBPUSD Spread: 1.9
- Stocks Spread: 0.002
- Regulator: ASIC, CySEC, DFSA, FSC, FSCA
- Platforms: MT4, MT5
About XM
XM is a globally recognized forex and CFD broker with 10+ million clients in 190+ countries. Since 2009, this trusted broker has been known for its low fees on 1000+ instruments. XM is regulated by multiple financial bodies, including the ASIC and CySEC.
Pros
- The broker offers premium research including market sentiment, fundamental insights and strategy builders
- 1000+ instruments are available, including recently added thematic indices, providing exposure to emerging industries
- Transparent and low fees with spreads from 0.0 pips that will help protect day trading profit margins
Cons
- There's $5 inactivity fee after only 3 months, though this won't affect active traders
- There is weak regulatory oversight through the global entity
- PayPal deposits are not supported
#5 - IC Markets
Why We Chose IC Markets
You gain access to over 2,250 CFDs, available for trading 24/5 across popular markets such as forex, commodities, indices, stocks, and bonds. Utilizing deep liquidity and advanced bridge technology, IC Markets ensures optimal conditions for scalpers, hedgers, and algo traders alike.
"IC Markets offers superior pricing, exceptionally fast execution and seamless deposits. The introduction of advanced charting platforms, notably TradingView, and the Raw Trader Plus account, ensures it remains a top choice for intermediate to advanced day traders."
- DayTrading Review Team
- FTSE Spread: 1.0
- GBPUSD Spread: 0.23
- Stocks Spread: 0.02
- Leverage: 1:30 (ASIC & CySEC), 1:500 (FSA), 1:1000 (Global)
- Regulator: ASIC, CySEC, FSA
- Platforms: MT4, MT5, cTrader, TradingView, TradingCentral, DupliTrade
About IC Markets
IC Markets is a globally recognized forex and CFD broker known for its excellent pricing, comprehensive range of trading instruments, and premium trading technology. Founded in 2007 and headquartered in Australia, the brokerage is regulated by the ASIC, CySEC and FSA, and has attracted more than 180,000 clients from over 200 countries.
Pros
- IC Markets offers fast and dependable 24/5 support based on firsthand experience, particularly when it comes to accounts and funding issues.
- You have access to over 2,250 CFDs across various markets, including forex, commodities, indices, stocks, bonds, and cryptocurrencies, allowing for diversified trading strategies.
- IC Markets offers among the tightest spreads in the industry, with 0.0-pip spreads on major currency pairs, making it especially cost-effective for day traders.
Cons
- While IC Markets offers a selection of metals and cryptos for trading via CFDs, the range is not as extensive as brokers like eToro, limiting opportunities for traders interested in these asset classes.
- Despite four industry-leading third-party platforms, there is no proprietary software or trading app built with new traders in mind.
- The breadth and depth of tutorials, webinars and educational resources still need work, trailing alternatives like CMC Markets and reducing its suitability for beginners.
What Is An Index?
An index is a financial term for a method of tracking the performance of a market or a group of assets in a set, uniform way.
Indices can follow specific stock markets, like the ASX, or areas of economies and industries, like the top technology stocks, top non-technology stocks, etc.
Additionally, indices can encapsulate an entire market, such as the TAIEX which tracks the performance of the Taiwan Stock Market as a whole. Within finance, you cannot invest directly in an index.
Indexes may have different methods for calculating their value and weighting their constituents. Generally, an index would have a base value, e.g. 100, and a base year.
The value would then increase or decrease based on the performance of the index’s constituents.
The change in the value of an index is often more important than the value itself, as that indicates if the market is growing or not.
Popular Indices
CFD indices trading is popular in markets across the world. Some of the most commonly-traded indices include:
FTSE 100
The FTSE 100 is a UK stock market index that tracks the performance of the shares of the top 100 enterprises listed on the London Stock Exchange (LSE).
Note, just because the index tracks London Stock Exchange-listed stocks, that doesn’t mean that only UK-based companies can be found there. This index is maintained by the FTSE Group, which is a subsidiary of the London Stock Exchange Group. The FTSE 100 is one of the most popular instruments for CFD indices trading.
NASDAQ 100
This is a US index of the 100 largest non-financial companies that are listed on the NASDAQ stock exchange. The weights of stocks in the index are based on their market capitalisations, with rules implemented to cap the influence of the larger listed securities. You can find an index consisting only of the financial companies in a separate index called the NASDAQ Financial-100.
Dow Jones
This is a US index of the top 30 companies that are listed on the New York Stock Exchange (NYSE).
S&P 500
This is a US index of the 500 companies that have the largest market capitalisation. This is favoured for CFD indices trading as it tracks a massive portion of the US economy.
DAX
This is a German index that tracks the performance of the top 40 companies listed on the Frankfurt Stock Exchange. Although not as big a market as some others, it remains quite popular for CFD indices trading due to more regular market movements.
Why Are Indices Suitable For CFD Trading
CFD indices trading involves speculating on some of the best-performing companies in global markets. This provides diversified exposure to the underlying market without having to invest in individual companies, spreading the risk.
This in turn means that there is a reduction in the possibility of wild market movements in reaction to sudden news releases.
In addition, as an investor, you do not have to carry out as much in-depth technical analysis of individual companies when CFD indices trading.
Your investment will likely be spread over several industry sectors, reducing the stress of having to manually identify potential stocks worth looking into.
Moreover, CFD indices trading is possible throughout the day and is not necessarily limited to normal stock trading hours.
Pros Of CFD Indices Trading
- Your positions are naturally spread across multiple industries and companies, diversifying your investment and reducing the possibility of drastic instability.
- Returns are measured on the performance of the index as a whole instead of any particular stocks, meaning that the trade wins or loses based on the performance of all of the listed stocks on the index.
- You can “short” an index if its overall performance is in decline, allowing you to still speculate on bearish markets.
- CFD indices trading allows you to speculate upon different global markets as a whole, rather than individual stocks, which requires much less in-depth research.
Cons Of CFD Indices Trading
- You do not own any of the stocks listed within the particular index in which you open a CFD position.
- Although the performance of the index you speculate against is not majorly influenced by any single company and is more stable than trading individual stocks, the index value could still undergo drastic changes. It is a real possibility that you could lose more than you invest if trading on margin, so great caution needs to be taken.
- CFD indices trading is not supported in all countries. For example, the USA has banned all CFD trading.
Strategies
Follow The News
Before deciding what index you want to speculate upon using CFD indices trading, keeping yourself up-to-date on the latest financial news is paramount.
Changes in local laws can have a huge effect on any indices based in the area and being able to spot where the market is likely to head will place you in a better position to make the right choices.
More importantly, this will allow you to stay aware of possible future movements, reducing the chances of the market catching you off guard.
Hedging
Since CFD indices trading allows you to sell (“short”) the index, it is often used to hedge existing investments.
If your portfolio consists of several stocks from the same index and you expect there to be a sudden decline in the market, you can short the index with CFDs to offset the losses you would see from your main investment, reducing your downside exposure.
Check that your broker permits hedging prior to trading.
How To Start CFD Indices Trading
Choosing A Broker
To begin your CFD indices trading journey, you must first find a CFD broker that offers the right instruments. When doing your research, it is helpful to consider the following points:
- Leverage Rates: If you have a particular index in mind, you should investigate and compare the margin trading conditions offered. The lower the margin, the lower the required initial investment.
- Spreads: CFD indices trading brokers often make money from the spreads that they offer to you. The lower the spread, the lower the price movement you need to cover the trade cost.
- Reputation: The reputation of a broker is important when dealing with CFD indices trading, given that certain countries have limited regulations for this kind of trading. Is the broker well known? Have they had any reported issues with their platform before?
- Customer Support: The last thing that an investor wants is not being able to access their funds or make decisions on their positions due to errors with the platform. Customer support should not be overlooked, some brokers even offer 24/7 support.
- Fees: There can be many fees associated with CFD indices trading, such as overnight holding charges and transaction fees. Compare the costs of using each broker and try to consider them against your trading approach.
There are lots of different brokers that can offer you CFD indices trading on commercial or proprietary platforms, including City Index and Fineco Bank. Choosing the right broker could mean the difference between success or failure when CFD indices trading, see our list of top recommendations here.
Opening Your Position
As a rule of thumb, you should never invest more than you are comfortable losing. Most CFD indices trading platforms are easy to use, and entering/exiting your position is quick and simple. You will be presented with the options to buy (long) or sell (short) your chosen index.
Going long when CFD indices trading means that you expect the value rise to rise while going short is the position to take when you expect price drops. Most broker platforms offer you extensive information about different instruments, showcasing their data history to help inform your decisions.
Monitoring Your Position
You should keep a close eye on your positions once you open them, putting in place automated exit strategies if possible. If you think that your position is going to start failing, you should exit it to avoid losses. Some platforms allow you to place automated limits, called stop orders, which, once hit, will exit your position for you.
However, the negative balance protection offered by brokers is less a guarantee than a target, as severely unfavourable trading conditions, often coupled with lots of leverage, can still result in you losing a lot of money. Rapid and volatile changes in the market can sometimes be too quick for loss prevention strategies to react to.
Tips For CFD Indices Trading
Here are some useful tips that could help you during your CFD indices trading journey.
- Use stop losses and take profits to limit your losses.
- If you hold a stake in a given index through owning stocks in companies listed on there, consider hedging during times of poor market performance to offset any of your losses.
- Don’t invest more than you can handle losing.
- Be wary of using high leverage rates as, while profits are increased, losses are magnified.
Final Word On CFD Indices Trading
CFD indices trading is a great way for retail traders to access the indices markets without needing to physically invest in funds and trackers, simply making money from correct speculation of an index’s price movements. Leveraged trading is offered by most CFD brokers and allows profits to be magnified and markets to be accessed for less capital, though losses are also amplified. If you wish to begin CFD indices trading, check out our top CFD brokers.
FAQs
How Do CFDs Work?
CFD indices trading allows investors to speculate on the future performance of a market without needing to own the particular asset. CFDs are often more accessible than spot products and traders can trade in both bullish and bearish markets.
What Is An Index?
An index is a financial term for a method of tracking the performance of a market or a group of assets in a particular set. CFD indices trading involves taking out the derivatives contracts on index trackers.
What Is Going Long/Short When CFD Indices Trading?
When you buy “long”, you are predicting that the index will go up in value. When you sell “short”, you are predicting the opposite, that the index is going to decrease in value. If your predictions are correct, you will make money on your trade, and vice versa if you are wrong.
Are Trading Hours the Same Across All CFD Indices Trading Instruments?
No. CFD indices trading hours vary from index to index. Some indices may be 24-hours, while others follow the opening hours of the equities markets they are based on.
Do I Have To Pay Stamp Duty On My CFD Index Trades?
No, CFD indices trading is exempt from stamp duty in the UK. However, other countries may have different taxation policies, you can check out our CFD taxes page for an overview, though it is recommended you speak to a qualified advisor before making any tax-related financial decisions.