Trading Indices with Tredero
Indices track the performance of market sectors like the DAX (Deutscher Aktienindex – German stock index), for example, a blue-chip stock market index that measures the value of the thirty largest German corporations listed on the Frankfurt Stock Exchange. Following the WildCard controversy in November 2020, Germany’s Deutsche Börse announced that the index would be modified to track the forty largest firms rather than the thirty now followed. This transition is expected to occur by the end of 2021. Other indices include the Dow Jones Industrial Average in the United States and the FTSE 100 in London, which measures the performance of the top one hundred companies on the London Stock Exchange.
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Advantages of Indices Trading
Tredero’s indices trading is done using CFDs, which provide significant benefits to investors, such as the increased leverage available for CFD transactions. Trading indices is a viable technique to mitigate trading risks while also providing considerable portfolio diversification potential. Take the FTSE 100, for example. While not impossible, it is unusual that the stocks of all the companies that make up the index would experience massive price movements simultaneously. While some stocks may lose value, others may increase, providing investors with a hedge against potential losses, such as those caused by a single stock collapsing.
Another advantage of trading indexes is their simplicity and flexibility. Consider buying equities in all of the firms that make up the FTSE 100 index. While it is possible, it would necessitate a substantial amount of funds and expensive costs and broker commissions. Because indices track specific market segments, they are the only way to invest in that segment.
How Indicies are Calculated
Indices can be calculated using a variety of weighting methods, including:
- Market Capitalization
- Price Weighting
- Volatility Weighting
- Minimum Variance Weighting
- Equal Weighting
- Factor Weighting
- Free-float adjusted Market-Capitalization
- Fundamental Factor Weighting
The FTSE 100 is an excellent example of a Market Capitalization weighted index, whereas the DAX is a Price Weighted index.
The FTSE 100, Dow Jones, DAX, Australia’s ASX, and the French CAC 40 are among the most widely traded indices on Tredero. Indices on Tredero are traded on our award-winning MetaTrader 4 and MetaTrader 5 platforms as CFDs.
A Tredero account gives you access to all of the world's most popular indices, allowing you to trade them all. We also provide a free demo account to enable you to practise trading without risk, making the Tredero demo account the ideal option to hone your abilities before moving on to a live funded account.