subject: Many CFD Trading Traders Choose The Index [print this page] Many CFD Trading Traders Choose The Index
We know that CFDs or contracts for difference trading can be achieved on stocks, currency, commodities as well as bullion. It's also possible to trade CFDs about the index itself instead of any individual stock. This method is a useful one given that it is a diversified one when compared with concentrating on just one stock and since the index normally straddles a spectrum of industries, effects on anyone particular stock is not a consideration. To some extent, you are protected in the volatility that you might have to suffer when taking CFD positions on single stocks. If you believe that the Dow Jones, NASDAQ or FTSE 100 arrives for an up move, you are able to trade CFDs depending on that belief and make profits if the market indeed move according to your belief. On the other hand, you can also do CFD trading for that index on the short side in the event you think the market is going to tank.
Index CFD trading can be achieved for all the major indices in the world and traders often take hedging positions by going long on a single index and shorting another so that they don't lose money. The indices which are normally considered for CFD trading are the UK, US, Australian, Far East and German markets. The Japanese Nikkei as well as the France CAC indices are also traded though on the lesser volume.
Many traders who would like to trade CFDs for the short term generally prefer to trade the FTSE, Dow Jones or even the S&P because they are aware of the technical analysis and also the effect on the price action because of these technical charts when compared with pure fundamentals.
The advantages of index CFD trading are that you can as mentioned trade the various global indices and never bother to track performance of any one company constituting those indices, since you may not get access or spare the time to do so and trade their CFDs. There's also a cover of some safety against very sharp progresses the index since some of the stocks inside the index will do well and that will help cushion some of the negativity caused by other stocks within the same index. Obviously, this depends on the weight age assigned to the different stocks creating the index and the effects will be seen accordingly.
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