At InvestinGoal, we adhere to strict standards to ensure an unbiased review process. We conduct our reviews by examining each broker’s offering and performance across 4 key categories. A final rating is produced for each forex broker based on a total of 187 data points. Learn more about our review process and methodology.
In this article we have included mainly brokers that offer CFDs on indices, but not only that. Some of them also offer Futures, Options and Spread Betting on indices.
In our choice we have taken into consideration a number of factors including:
- The number of indices available.
- The commissions involved.
- The different derivatives and ways to trade indices offered by each broker.
- The availability of mini-indices.
- The overall trustworthiness of the brokers.
Table of contents
Below is a closer look at some of the key information for each major broker we have listed.
|Indices brokers||Total indices number||SPX500 spread||Mini-indices|
|IC Markets||20+||0.2 pips||Yes|
|NAGA Markets||8+||0.7 pips||No|
|FP Markets||12+||0 pips||No|
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.
Between 74-89% of retail investor accounts lose money when trading CFDs.
You should consider whether you can afford to take the high risk of losing your money
Top 10 brokers for trading indices: 2022 review
Here are the brokers we have selected as some of the top choices for trading indices.
How much money is needed to trade indices?
To trade indices you should have at least $2,500 in your account. In fact, considering that you should not risk more than 2% of your capital per trade, and that $50 is generally the minimum amount of money needed to open an order on indices, $2,500 gives you some degree of flexibility.
This amount varies from broker to broker according to three factors:
- The contract: the amount of money needed to open a “full” position on the index.
- The volume: how many contracts the broker needs to execute the order.
- The leverage: multiplier of funds you have available in your account.
For example, if a contract is worth $10,000 and the minimum volume is 0.1, that means you will need $1,000 to open a position.
Leverage can then be applied to further reduce the amount required. With a 1:20 leverage, it will be possible to open a position with $50 ($1000/20).
However, the higher the leverage, the higher the risk. In fact, investing $50 at 1:20 leverage would mean that a 1% change in the index would correspond to a $10 change in the position (1% of $1000 is $10).
A solution are brokers that offer mini-indices such as IC Markets, which are based on smaller contracts. These allow traders to open positions on indices with less money than their standard counterparts.
Visit IC Markets
(74-89% of retail CFD accounts lose money)
For this reason, it is not recommended to deposit little money and use high leverage when trading indices.
If you are going to trade with leverage, you need to make sure that you have the necessary margin to absorb any natural market swings.
For example, on a daily basis, the S&P value fluctuates about 500 points, which translates to $5 or $0.5 if we take the previous example with the trade of 0.1 contracts. So in case of 1:20 leverage (which can be even higher), we can expect a maximum daily fluctuation of $10 which would wipe a low-budget trading account in a few days if everything goes wrong.
Resources to get started and learn index trading
DailyFX is more aimed at general trading, but there is specific data about indices. Under ‘Market Data’ you can find the basics about Indices. Navigating through the site, you’ll find market news, educational materials, and more, including ones about indices.
At Money Control, you’ll find global indices and some data (current value, change, etc). In general, the site deals with many topics but features a lot about trading and finance. Under ‘Markets’ you can find useful information about different topics, including indices.
With Investopedia, under the category “Index Trading Strategy”, you’ll find different guides and articles on index trading. This is helpful for both experienced indices trading and for those newer to trading and who want to expand their knowledge.
Indexology has different sections, including ‘Indices’ with all the information you need about Indices. The ‘Research and Insights’ area leads to Blog, Education, Performance Reports, and Commentary sections. All have information relating to Indices.
Investing.com is one of the most famous websites about finance and investing. You’ll find summary information and technical analysis on all of the world’s indices, live graphs of indices, and more.
Index investing vs Index trading
There are two main ways to invest in indices. The first is to speculate on their value, or the second is to invest in them for the long term.
- In speculation , the risk involved is high, as you will have to use leverage and know how to manage your trading positions.
- In long-term investing , on the other hand, the focus is on the fact that historically indices tend to increase in value. So a long-term investment may be less risky.
However, you should be aware that long-term investing with derivatives may not be ideal, as there are a number of daily fees called rollovers, which slowly reduce the potential margin or earnings. In this case, it is best to learn about brokers that offer equity ETFs such as DEGIRO.
(Investing involves risk of loss)
Although they are a more flexible and economical way to invest in indices, it must be remembered that they are more or less faithful replicas of the performance of indices, and not real indices.
Keep in mind also, that by investing in ETFs indices, you will generally not be able to trade futures since all ETFs are based on spot index prices.
Trading Indices vs stock trading
Investing in indices is a good way to diversify your portfolio as it is a basket of stocks.
The stock market, while requiring less money to open a position in most cases, exposes us more to risk since we have to pick individual stocks.
However when it comes to short-term speculation, both come with a high level of risk
What are synthetic indices?
Synthetic indices are ETF-like assets that replicate certain features of particular financial markets in real-time.
The most well-known of these tradable assets is the VIX also known as the fear and greed index. This index monitors volatility in the market and is often used by experts to assess the sentiment or emotional state of the market.
The Boom 1000 Index is another such synthetic index that also measures volatility over a set period of time.
Useful tips for beginners to trade indices
Here are some useful tips for those new to trading indices:
- Consider that under ESMA, FCA, and ASIC guidelines, the maximum leverage on indices is 20:1
- Practice with a demo account before depositing real money
- Read content published on specialized websites to study the index trading market
- Learn how to set stop losses and take profits for effective risk management
What is the difference between spot and futures indices?
A spot index refers to its price: it is the current price in the market at which the index can be bought or sold immediately. Index futures are futures contracts that allow traders to buy or sell an index today to be set at a future date.
Is it risky to trade indices?
Online trading, in general, is risky, and while indices are less volatile than other markets, they are no exception. Open a demo account to practice before depositing real money.
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