Indices

Pylon FX is committed to satisfy the needs of its clients with a full range of services and trading tools.

That is why we give our customers the opportunity to trade stock indices.

Indices are financial derivatives that are calculated as a weighted average of share prices of top performing companies listed on the exchange.

Stock indices track and measure particular baskets of related stocks. With thousands of stocks trading on the various major exchanges, indices provide an accurate and efficient way for investors to reliably track overall market sentiment as well as to benchmark against their individual stocks’ portfolios.

The advantage of trading indices over individual stocks, and using them in passive investment strategies, is that they offer exposure to an entire industry. Investors do not have to perform thorough research on individual company reports; they only need to take a bullish or bearish position, depending on the overall market sentiment. The price movement of indices is also a lot smoother as no one individual stock can induce an extreme price spike. This naturally makes index trading less volatile.

Still, due to the amount of activity that takes place on individual stocks, indices offer sufficient volatility for traders to pick out numerous profitable trading opportunities. This is especially true for day traders and news-based price action followers since indices often reflect the broad economic effects of both political and economic shifts.

When trader opens positions on indices, he trades on what is called a “basket of stocks” or a combination of stocks. The great thing is that you don’t even have to own the stocks to be able to trade them. Some indices follow a certain category of stock – for example the Nasdaq is composed of non-financial companies – Apple, Amazon, Alphabet Class A (Google), Intel and more.

Why would you trade indices though compared to individual stocks? The most obvious benefit is diversity and most financial advisors recommend this as a risk management strategy. Volatility is averaged out amongst the various companies, whereas if you are invested in just one, your entire investment is exposed to the volatility of just one company’s stock.

Another benefit, especially if you are investing in indices in different locations, is the ability to trade around the clock. This can be very helpful if you trade during certain hours, and another benefit is if something happens in one-time zone, it has the potential to affect the next market opening.

Another reason is stock markets are usually positively correlated to the health of an economy. If a country’s economy is up, so is its stock market – there are instruments though that move inversely to the health of an economy.

Safe haven currencies and precious metals usually move against the health of an economy, as investors flock to them to keep their assets safe during market volatility.

The world’s most popular indices are:

  • Dow Jones Industrial Average - One of the oldest and best-known stock market indexes in the world, the DJIA tracks the price of 30 large, publicly traded US companies. Also known as the US30.
  • S&P 500 - A basket of the 500 largest US stocks, representing around 80% of total US market capitalisation. The S&P500 is therefore seen as a good indicator of how the US economy is performing.
  • The Nasdaq 100 - This index is a basket of the 100 largest, most actively traded U.S companies listed on the Nasdaq stock exchange. The index includes companies from various industries except for the financial industry, like commercial and investment banks. These non-financial sectors include retail, biotechnology, industrial, technology, health care and others.
  • DAX 30 - Tracks 30 major German companies trading on the Frankfurt Stock Exchange. The DAX 30 index, or Germany 30, is considered a barometer of the German economy.
  • FTSE 100 - Tracks the top 100 stocks trading on the London Stock Exchange. Although UK-based, many FTSE 100 companies are globally focused and earn revenue outside the UK, therefore it does not closely follow the UK economy.

Indices are unique financial instruments that could be used both for trading and analysing the condition of the market or the global economy as a whole. Trading stock indices engenders many openings, meaning you can diversify your trading strategies across uncorrelated instruments as well as take advantage of the different opportunities that global equities markets present.

Key benefits of trading indices:

  • Diversify your portfolio: Increase your exposure to the world's top financial markets.
  • Improve your trading potential: Indices enable you to speculate on both rising and falling markets.
  • Take advantage of market movement: Trade on volatility generated from corporate news and world events.
  • Broaden your trading opportunities: Tap into the opportunity of a market or sector, without stock-specific risks

Customers of Pylon FX can now Buy or Short Sell above mentioned 5 major stock indices.

SymbolDescription
•  US30CFD on Dow Jones index
•  SPX500CFD on S&P 500 index
•  NAS100CFD on Nasdaq index
•  GER 30CFD on DAX index
•  UK 100CFD on FTSE 100 Index