Get immediate exposure to an entire index
A primary advantage of trading indices using derivatives like CFDs is the sheer breadth of market exposure accessed in a single position.
Indices, as a representation of an entire market or industry, measure the overall performance of all stocks included within the index. For example, let’s say a notable event occurs that affects the market as a whole rather than just a few specific companies. By taking a position on an index like the S&P 500, you trade on how the incident will impact a wide cross-section of the most important stocks in an economy or sector.
When you trade an index in this way, you also take your position at the exact price of the market at the time you trade, minus any charges incurred.
To gain a similar level of exposure through traditional investments, you’d have to incur the time and monetary costs of purchasing the individual shares making up the index, or invest in an exchange traded fund (ETF), which would be priced according to the fund's net asset value.
Simply put, indices trading is an immediate and direct way to trade on the movements of the total market at its current price.
