<\/span>What Is a Stock Market Index?<\/span><\/h2>\n
A stock market index<\/strong> is an index of the average price of a certain set of instruments, such as stocks<\/a> of different companies, united in one group. Indices are calculated by various rating agencies and organizations by various formulae, such as a simple average price, weighted average price, etc. However, there is no need to learn the formulae as you will not have to calculate the indices yourself.<\/p>\n\n

<\/span>Popular Indices<\/span><\/h2>\n
Each exchange features its own set of indices for trading, the most popular ones being:<\/p>\n
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The Dow Jones index<\/a>. This index unites the stocks of 30 biggest companies. By the way, this one is among the first indices that have been calculated and used in trading.<\/li>\n
The next popular one is the S&P 500<\/a> (Standard&Poor's) index. As might be guessed from the name, there are 500 companies in this index. It suits beginner traders perfectly because it has excellent liquidity and volatility. What is more, the S&P 500 reacts to the movements of individual companies rather calmly as there are so many stocks used in the formula.<\/li>\n
The NASDAQ 100 index<\/a> unites the stocks of 100 largest companies traded on the exchange with the same name.<\/li>\n <\/ul>\n
On European exchanges, the most popular indices would be:<\/p>\n
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The DAX<\/a> index. It features the 40 largest companies in Germany.<\/li>\n
CAC 40<\/strong> is a French index, uniting 40 of the biggest French companies.<\/li>\n
FTSE 100<\/strong> is a British index, calculated for 100 companies with the biggest capitalization.<\/li>\n <\/ul>\n
Asian market:<\/p>\n
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Nikkei 225<\/strong> is an index of the Tokyo stock exchange, calculated for 225 companies.<\/li>\n
Shanghai Composite<\/strong> is an index of the Shanghai exchange.<\/li>\n <\/ul>\n\n
The table puts the same eight indices side by side, with the symbol to look for in MetaTrader where RoboForex offers the index as a CFD.<\/p>\n
\n \n \n
Index<\/th> Market<\/th> What it includes<\/th> Companies<\/th> Exchange hours, local time<\/th> At RoboForex, MT4\/MT5<\/th><\/tr><\/thead>\n
Dow Jones Industrial Average<\/td> US<\/td> Large US companies from most sectors, weighted by share price<\/td> 30<\/td> 9:30 to 16:00, New York<\/td> US 30 (.US30Cash)<\/td><\/tr>\n
S&P 500<\/td> US<\/td> Large US companies from all sectors, weighted by market value<\/td> About 500<\/td> 9:30 to 16:00, New York<\/td> US 500 (.US500Cash)<\/td><\/tr>\n
Nasdaq 100<\/td> US<\/td> Largest non-financial companies listed on Nasdaq, led by technology<\/td> 100<\/td> 9:30 to 16:00, New York<\/td> US TECH (.USTECHCash)<\/td><\/tr>\n
DAX<\/td> Germany<\/td> Largest German companies on the Frankfurt exchange<\/td> 40<\/td> 9:00 to 17:30, Frankfurt<\/td> DE 40 (.DE40Cash)<\/td><\/tr>\n
CAC 40<\/td> France<\/td> Largest French companies on Euronext Paris<\/td> 40<\/td> 9:00 to 17:30, Paris<\/td> Not on MT4\/MT5<\/td><\/tr>\n
FTSE 100<\/td> UK<\/td> Largest UK companies by market value on the London Stock Exchange<\/td> 100<\/td> 8:00 to 16:30, London<\/td> Not on MT4\/MT5<\/td><\/tr>\n
Nikkei 225<\/td> Japan<\/td> Leading companies on the Tokyo Stock Exchange, weighted by share price<\/td> 225<\/td> 9:00 to 15:30, Tokyo, break 11:30 to 12:30<\/td> JP 225 (.JP225Cash)<\/td><\/tr>\n
Shanghai Composite<\/td> China<\/td> All stocks listed on the Shanghai Stock Exchange<\/td> All listed<\/td> 9:30 to 15:00, Shanghai, break 11:30 to 13:00<\/td> Not on MT4\/MT5<\/td><\/tr>\n <\/tbody>\n <\/table>\n <\/div>\n
Index CFDs trade for longer than the exchange itself: the RoboForex session for each symbol is in the specifications table further down.<\/p>\n\n
<\/span>What Moves Index Prices<\/span><\/h2>\n
An index is the combined price of its companies, so anything that changes what investors will pay for those companies moves the index. Four drivers account for most of the movement you will see on the chart.<\/p>\n
\n
\n
1<\/div>\n
Results of the largest companies<\/div>\n
In an index weighted by market value, the biggest companies carry the most weight. A quarterly report from a handful of US technology giants can move US TECH and US 500 for the whole session.<\/div>\n <\/div>\n
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2<\/div>\n
Interest rate<\/a> decisions<\/div>\n
Lower rates make borrowing cheaper for companies and make stocks more attractive than deposits, which usually supports indices. Rate rises tend to weigh on them.<\/div>\n <\/div>\n
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3<\/div>\n
Economic data<\/div>\n
Inflation<\/a>, jobs and growth figures shape what traders expect from the central bank. Release dates are in the economic calendar<\/a>, and index prices often jump in the minute after a release.<\/div>\n <\/div>\n
\n
4<\/div>\n
Market mood<\/div>\n
Political news, trade disputes and sharp moves in other markets can push all indices up or down together. News that arrives while the exchange is closed shows up as a gap<\/a> at the next open.<\/div>\n <\/div>\n <\/div>\n\n
<\/span>Trading Indices<\/span><\/h2>\n
The chart of an index does not differ from the chart of any other trading instrument, though many traders keep searching for some peculiarities. In reality, indices are no more difficult to trade than, say, CFDs or currency pairs. Indices can be analyzed by virtually any indicator, technical<\/a> or candlestick analysis<\/a>. Fundamental<\/a> data is also worth paying attention to, but in the case of trading indices, you will have to track different sources and analyze lots of information.<\/p>\n
There is nothing supernatural to it, fundamental analysis<\/a> simply requires a somewhat specific approach to the data. The growth of indices means that the stocks of the companies it contains also grow and strengthen, while if the index declines, the companies are not doing very well.<\/p>\n\n
Using Tech (Graphic) Fibo Analysis<\/h3>\n
Indices, as well as other instruments, sometimes form certain patterns<\/a> of graphic analysis on the charts, and such patterns may be used for entering the market. Only, you have to pay attention to the working hours of the exchange which your index is traded on. Keeping in mind that the exchange does not work 24\/7, gaps are likely to form on the chart, and they can sort of correct the formation process of the patterns.<\/p>\n
In the case of intraday<\/a> trading, such gaps<\/a> play no critical role; the best timeframes would be from M5 to M30. This will let you carry out your analysis on a large number of candlesticks almost without gaps. The easiest patterns<\/a> to define are the Flag<\/a>, Pennant<\/a>, Head and Shoulders<\/a>, and their inverted versions. Stock indices sometimes react very abruptly on the news<\/a>, that is why beginners should abstain from trading during the first 30 minutes of work of the exchange.<\/p>\n\n
Trading Support and Resistance Levels<\/h3>\n
The next popular option of trading indices is following bounces off the key support and resistance<\/a> levels. There are several variants of trading support and resistance levels, but we shall discuss a complex approach using reversal candlestick patterns<\/a>, such as the Hammer, Hanging Man, Inverted Hammer<\/a>, Shooting Star, Doji, and Engulfing<\/a>.<\/p>\n
Bounces off the levels may be searched for on any timeframe, and the gaps emerging at the opening of the session will not have any critical influence. However, the risks of mid-term trading should be kept in mind. A Stop Loss<\/a> that gets into a gap will be closed at the worst possible price.<\/p>\n\n
<\/span>Example: How to Trade an S&P 500 ETF at Resistance<\/span><\/h2>\n
On H1, we can see the SPDR S&P 500 ETF (ticker SPY), a fund that follows the S&P 500 index. Let us draw the support and resistance lines. The bigger has been the price near a certain value historically, the stronger this level is considered and the higher the probability of a bounce (a breakaway is not excluded either). The price neared the key resistance level and formed a reversal pattern Shooting Star for the first time; then the signal was executed and the index went down, letting the trader earn several points.<\/p>\n
$\"SPDR$ <\/a>
SPDR S&P 500 ETF (SPY), H1, September 2019: the first Shooting Star at resistance. Past results do not guarantee future performance.<\/figcaption><\/figure>\n
Sometime later the price approached this level again and upon testing it formed a Shooting Star again. The trader managed to execute a selling trade again according to the rules of trading candlestick patterns (the Stop Loss<\/a> was put behind the maximum of the signal candlestick). In this case, the risk to potential profit ratio was about 1:4.<\/p>\n
$\"SPDR$ <\/a>
SPDR S&P 500 ETF (SPY), H1, September 2019: the second Shooting Star at the same level. Past results do not guarantee future performance.<\/figcaption><\/figure>\n
This trading strategy<\/a> can be somewhat modified: we can use channels, if they are present on the chart, instead of the horizontal support and resistance lines. In such a case, buying should be executed from the lower border, and selling from the upper border of the channel. Keeping in mind the fact that indices normally move in one direction for a long time, trading the trend<\/a> is recommended. Positions counter the trend will make less profit and are riskier.<\/p>\n
$\"SPDR$ <\/a>
SPDR S&P 500 ETF (SPY), H1: buying from the lower border of the channel and selling from the upper one. Past results do not guarantee future performance.<\/figcaption><\/figure>\n
The same method works on the US 500 index CFD: the setup, the levels and the stop rules are identical, only the symbol changes.<\/p>\n\n
<\/span>Index CFD Specifications at RoboForex<\/span><\/h2>\n
At RoboForex you trade indices as CFDs, contracts for difference. You open a position on the index price, and your result is the difference between the price where you enter and the price where you close. You own no shares, so you can open a buy position if you expect the index to rise or a sell position if you expect it to fall.<\/p>\n
\n \n \n
Index<\/th> Symbol<\/th> 1 lot<\/th> Minimum lot<\/th> Average spread, points<\/th> Leverage<\/a><\/th> Session, server time<\/th> Currency<\/th><\/tr><\/thead>\n
US 500<\/td> .US500Cash<\/td> 1 contract<\/td> 0.01<\/td> 0.2<\/td> 1:100<\/td> 03:00 to 23:15<\/td> USD<\/td><\/tr>\n
US 30<\/td> .US30Cash<\/td> 1 contract<\/td> 0.01<\/td> 0.8<\/td> 1:100<\/td> 03:00 to 23:15<\/td> USD<\/td><\/tr>\n
US TECH<\/td> .USTECHCash<\/td> 1 contract<\/td> 0.01<\/td> 0.3<\/td> 1:100<\/td> 03:00 to 23:15<\/td> USD<\/td><\/tr>\n
DE 40<\/td> .DE40Cash<\/td> 1 contract<\/td> 0.01<\/td> 0.3<\/td> 1:100<\/td> 09:05 to 22:55<\/td> EUR<\/td><\/tr>\n
JP 225<\/td> .JP225Cash<\/td> 100 contracts<\/td> 0.01<\/td> 5.5<\/td> 1:100<\/td> 01:00 to 23:55<\/td> JPY<\/a><\/td><\/tr>\n <\/tbody>\n <\/table>\n <\/div>\n
Prime and ECN accounts<\/a>, commission 4 USD per 1 million USD traded. Pro accounts carry the same symbols with a wider spread and no commission. Source: RoboForex contract specifications, September 2026. Conditions change, so check the current figures on the indices page<\/a> before you trade.<\/p>\n\n
What One Trade Costs: a Worked Example<\/h3>\n
Say the US 500 stands at 6,000 points. The level is a round number chosen for the arithmetic, so check the current price in MetaTrader before you trade. One lot is one contract, so a 1-point move on 1 lot changes your result by 1 USD. Here is what a 0.1 lot position means in money:<\/p>\n
\n
\n
Position value<\/div>\n
600 USD<\/div>\n
0.1 lot × 6,000 points<\/div>\n <\/div>\n
\n
Margin at 1:100<\/div>\n
6 USD<\/div>\n
600 USD \/ 100<\/div>\n <\/div>\n
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Value of 1 point<\/div>\n
0.10 USD<\/div>\n
a 50-point move is 5 USD either way<\/div>\n <\/div>\n <\/div>\n
A position held past the end of the trading day pays a small overnight charge, the swap, and on Friday the swap is charged for three days to cover the weekend.<\/p>\n\n
\n
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Index CFDs From 0.01 Lot on MetaTrader 4<\/a> and 5<\/div>\n
Five major indices with leverage 1:100 and a commission from 4 USD per 1 million USD traded on Prime and ECN accounts.<\/div>\n <\/div>\n
\n See Index Conditions<\/a>\n <\/div>\n <\/div>\n\n
<\/span>How to Trade Indices: Step by Step<\/span><\/h2>\n
These five steps take you from choosing an index to closing your first trade. Run them on a demo account first: the prices are real, the money is virtual.<\/p>\n\n
Step 1. Choose One Index and Learn Its Hours<\/h3>\n
For a first trade, the US 500 is the usual choice: it has the lowest average spread in the table above, a long session and plenty of news in English. Note when the New York exchange opens, 9:30 local time, because the first 30 minutes after the open move the fastest.<\/p>\n\n
Step 2. Open a Demo Account and Find the Symbol<\/h3>\n
Open a demo account in MetaTrader 5<\/a>. In the Market Watch window, right-click, choose Symbols, search for .US500Cash and click Show Symbol. Drag it onto a chart and switch the timeframe to H1.<\/p>\n\n
Step 3. Decide on the Direction<\/h3>\n
Use one method from the section on trading indices above: find the trend, draw the nearest support and resistance levels and wait for a reversal candlestick at one of them. Then open the economic calendar<\/a> and check for inflation, jobs or central bank releases in the next 24 hours, because a release can override the chart pattern.<\/p>\n\n
Step 4. Size the Position and Set the Stop Loss<\/h3>\n
Decide before you enter how much of the deposit this trade may cost. Many traders limit it to 1 to 2%. With a 500 USD deposit, 1% is 5 USD. If your stop loss sits 20 points from the entry, divide 5 USD by 20 points: you can afford 0.25 USD per point, which on the US 500 is 0.25 lot. At an index level of 6,000 that position needs 15 USD of margin. The calculator below does the same sum with your own numbers.<\/p>\n\n
\n
US 500 position size calculator<\/div>\n
\n Deposit, USD<\/span><\/label>\n Risk per trade, %<\/span><\/label>\n Stop loss, points<\/span><\/label>\n US 500 level, points<\/span><\/label>\n <\/div>\n
\n
Money at risk<\/div>
5.00 USD<\/div><\/div>\n
Position size<\/div>
0.25 lot<\/div><\/div>\n
Margin at 1:100<\/div>
15.00 USD<\/div><\/div>\n <\/div>\n
1 lot of US 500 = 1 USD per point. The lot is rounded down to the 0.01 step.<\/div>\n <\/div>\n