Stock trading is all about selling and purchasing stocks aiming at earning some income. Traders, in this case, purchase and sell shares of the company. However, that is not the only way to make a profit in this market. It is also possible to trade the index. Find out how to do that and what benefits of this type of trade are. 

Understanding Stock Index 

A stock index is calculated based on the data of a group of shares. Different indices can be used to evaluate a sector, market, economy, etc. Usually, the top shares are used in the calculation. In essence, they give insights into regional or global markets. 

Lots of those who like trading on index prefer to do this via CFDs. Everything here works like with a regular trade. This means that you purchase if you think that the index will increase and sell if it is expected to decrease. 

The following are the most popular options for indicies trading: 

• The ASX 200. It is calculated based on the data from the top 200 companies in terms of market cap. They are listed on the ASX stock exchange (Australia).
• The FTSE 100. This index is calculated based on the 100 largest companies in terms of market cap on the LSE stock exchange (the UK).
• The Dow Jones. It is calculated based on the data from the top 30 businesses on the NYSE and NASDAQ (the US).
• The DAX. This index is calculated based on the 30 largest companies on the FRA exchange (Germany).

Why Trade Indices

You may wonder why you should use an index in trading instead of simply trading shares. The main reason is that it is much easier to analyze and predict the movements in a particular market or sector than the progress of a specific company. So, this can actually be a good option for beginners.