An index is the measurement of the prices of specific stocks using a systematic method. Index trading strategy is used to make profit out of the price movements of indices. A stock index is the representation of the overall stock market performance as a whole. Each index measures the stock market of a particular group especially, it can be a country, industry sectors or any types of commodities.
There are many indices available for trading and they are traded as same as forex or stocks. Indices bring high volatility, which means the price can move in any direction.
Here are some national stock market indexes all around the globe:
- European stock market index
- Stock market index India
- China equity market index
In this article, we will discuss 3 popular index trading strategies. Find which index trading strategy is best suitable for your trading approach.
Types of global indices
The most popular:
- Dow Jones (DJ 30), includes the 30 biggest companies in the U.S.
- S&P 500, it’s the biggest index in the world
- NASDAQ 100
- DAX 30, the German index
- FTSE 100
- CAC 40
- NIKKEI 225, containing 225 biggest companies in Japan
Significance of Index trading strategies
You can decide which index trading strategy works best when you can measure your risk tolerance and how promptly you respond to any market change. One needs to practice different index trading strategies to know which will better perform according to his trading style.
Three most common & popular index trading strategies are mentioned below:
The Scalping Indices
Scalping trades are quite short as they are mostly open and close within a few minutes. The profit on each trade is also low because of this reason. To make enough profits, a trader has to trade with high volumes. You can do index scalping manually or using trading robots.
Day Trading Indices
Day trading usually lasts for a few hours within a single day. Market securities tend to rise and fall according to circumstances. Day traders use market indices to analyze the overall activity of the market they are intending to trade.
ETFs and derivatives products are some popular securities in the financial markets. Day traders use these products to make lucrative trades as they help them detect the overall market more efficiently.
Swing trading indices
Swing trading lasts for a few days or even weeks. The best part is that you don’t have to check your positions all the time with this strategy. Stock indices are based on economic cycles so they get along well with swing trading.
If your trading style goes well with fundamental analysis rather than technical analysis, then swing trading is most suitable for you.
Recommended platform for index trading
The MetaTrader platforms provide world-class charting and trading features that help you do professional trading with CFDs on indices, Forex prices, commodities, cryptocurrencies and much more.
PriceAction Ltd. has got the most advantage on index trading, as they have successfully been providing 85% accurate Indices & Commodities signals for years. Over the years, they tested many strategies to identify the most effective ones that can give more profitable opportunities. Using their well-developed strategies they are now able to generate good profits per month with the most accurate signals.
Find more through this link to get you started
The strategies we have discussed so far are very vital to ensure the overall growth of the financial markets. Market indexes are very popular among global traders and investors.
As people are trying to simplify their trading methods, these index trading strategies came as most helpful to traders. However, traders must do full research on any market index before they intend to trade on.