How to Bet on Indices | Indices Betting
Why Spread Bet on Indices?
Stock indices are one of the most popular forms of financial spread betting. Stock indices offer often the smallest spread sizes available that can range from 0.5 points to 2 points. These tight spreads attract more traders, as their risk is lower. It is easy to bet on indices because global economic news that influences the performance of the stock indices is easier to monitor and understand than individual share price movements. Stock indices represent the performance and overall health of an entire economy. If a country is performing well on the global economic platform, it will almost always be reflected by the share price of its top companies.
Stock indexes or indices are the most actively traded spread bets. They include all the global indices such as the FTSE 100, German DAX, Japanese Nikkei, Dow Jones, S & P 500 and NASDAQ. Bets on stock indices are the most active bets traded alongside individual shares. The spreads, i.e. the difference between asking and bidding price or the bid-offer price, obviously differ from market to market depending on how popular they are.
With indices, you can take a position on the most traded markets in the world. Indices are formed by a statistical aggregation for a given number of share prices of a given number of top companies listed on a stock market. For example, the FTSE 100 is a measure of performance of the top 100 companies listed on the London stock Exchange (LSE). If you choose to bet on indices then there are a huge number of stock indices scattered across the world. The availability of these markets on spread betting platforms varies.
How to Spread Bet on Indices?
Betting on indices is simple and easy to understand. For example, the price of the FTSE 100 stands at 5940:5941 in a given day and you decide to buy the FTSE 100 at 5941 for £10 per point. You hold your bet open so that your prediction pays off as the price of FTSE 100 rises. If the price rises to 5950:5951 and you decide to close the trade, you will sell at 5950. Your profit = (5950-5941) * £10 = £90. The FTSE 100 and other indices will be quoted at two decimal places; the above example has been simplified. Remember that you can lose your money just as fast as you can win. Always take precautions and learn how to stop losses before betting on indices.
Types of spread bets on Indices
There are 3 different types of tradable spread bets on indices. They are:
- Daily Cash bets
- Daily future bet
- Quarterly bet
If you are holding a position for under 7 days then trade the Daily Cash bets. If you want to keep a position over 7 days then trade the quarterly bet. The quarterly bets are usually cheaper. The spreads are tighter on the Daily future bet markets. You will have to pay a small charge every night if you want to hold an open position. The bid-offer is wider for the Quarterly bet markets because the charge is built in and also because there is no overnight charge.
Indices are great financial products to bet on and make substantial gains over time. Most of the large indices are quoted 24 hours a day. Do not become obsessed about the markets, i.e. do not follow the markets at all times of the day and night. Do not trade when the bid-offer spread widens, usually after 9pm. Also, do not trade after 5pm-6pm if trading a European market. Finally, always take calculated risks when betting on indices. If you do your research, study the markets, you will gain.
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