Indices trading as CFDs has become a popular form of trading in recent years with an ever increasing number of investors dedicating funds to these particular trades.
Indices (plural form of Index) refers to the statistical change in the value for a particular segment of the market. Take for example London’s FTSE-100 which measures the performance of the 100 companies listed on the LSE (London Stock Exchange) with the largest market capitalization. The FTSE-100 dates back to January 3rd, 1984 and started life with an index base value of 1,000, a level which is still in use today.
The FTSE-100 reached its highest level to date on Wednesday, March 1st, 2017, when it peaked at 7,382.90
Quotes for the FTSE are an indication of the current value compared to the base. For example, today’s quote is 7,351.26. With the base level of 1,000, we can see that the FTSE is currently valued at around 7.3 times the base.
Since Indices refer to particular segments; there is no way to trade them directly other than as an index. Buying shares in each of the 100 companies that make up the index wouldn’t be the same as trading the index as the precise number that makes up the FTSE is a product of capitalization-weighted calculations.
Top Ten FTSE-100 Companies By Market Capitalization
Royal Dutch Shell
£160.12 bn.
SABMiller
£67.32 bn.
Unilever
£90.42 bn.
BP
£63.13 bn.
HSBC
£88.11 bn.
Vodafone
£56 bn.
BAT
£71.40 bn.
AstraZeneca
£49 bn.
GlaxoSmithKline
£67.38 bn.
Reckitt Benckiser
£46.32 bn.
Indices traders look at the performance based on the full quote. A full FTSE-100 quote would look like:
7,354.42 ↑39.46 (0.54%)
Which tells us that the current price (7,354.42), the current change from the previous day’s close (Up 39.46) and the change from previous day’s close as a percentage (0.54%).
EuropeFX offers access to a diverse range of Indices including in addition to the FTSE-100, the Standard & Poor’s 500 (S&P 500), the Dow Jones Industrial Index (DJIA), the Japanese Nikkei 225 (NI225) among others.