Stock market operations are far from covering individual companies’ stocks only. Regardless of their level of proficiency, nowadays traders often include stock indices in their trading practice due to a considerable set of advantages they come with. But let’s first take a quick look at what indexes actually are.
In general, indices represent the cumulative value of a batch of stocks. Grouping can be either region-based or industry sector-based. Stock indices come in different volumes with the more constituents an index has, the more representative it is considered to be. Some of the most wide-embracing and at the same time popular indices are Dow Jones, S&P 500, Nikkei 225, and FTSE 100. As a matter of fact, DJIA (Dow Jones Industrial Average) includes the stocks of only 30 blue-chip companies but its fame is so immense that there was no way to skip it in our list.
Although there are several methods for calculating a stock index, two are the most commonly used.
Market capitalization weighted method – the constituent stocks are weighted according to their relative total capitalization on the market. This means the overall value of the index is influenced predominantly by the performance of the biggest companies it comprises.
Price weighted method – here the price of the individual stocks is decisive. The movement of such indices can be affected even by the smallest constituent company, for example, if its price dramatically goes up for some reason. That is why price-weighted indices are not considered truly indicative of the region’s economic state or the respective industry sector performance.
How Indices Trading Works for Traders and Brokers
Long gone are the days when trading was an activity within the reach only of institutions and entities with huge capital. Currently, there are hundreds of online trading brokers whose range of services and instruments is so diverse that there is something for everybody interested in the field. The fact that brokerages often allow for commission-free types of accounts to be registered, contributes to the wide accessibility of the field.
What is characteristic of indices trading is that the buying and selling of a specific stock market index does not actually involve possessing a physical underlying asset. Rather, the task of traders is to speculate on the price of the particular index going up or down. If analyses show that a price is about to increase, traders will try to buy as soon as possible so that at a later stage they can take advantage of the resulting difference.
Since direct investment in stock indices is not possible, a number of derivative instruments have been created. Their availability in the portfolio of brokerage companies is not uniform, so always make quick research before joining a certain trading platform. Usually, the choice comes down to the following:
- Contracts for difference (CFDs) – they enable trading the price movement of indices. In other words, these agreements are used by online traders to place bets on whether the relevant price will rise or fall.
- Exchange-traded funds (ETFs) – ETFs resemble mutual funds that are traded just like stocks. Unlike mutual funds, however, the price of this basket of assets fluctuates throughout the day depending on the interest shown by buyers and sellers.
- Indices options – Options enable buying or selling an underlying stock index for a preliminarily set period of time. Remember, this is a right, not an obligation. As an underlying asset of options, index futures are often used.
Top Indices Trading Brokers
Profitable indices trading requires operating with a brokerage company that fits your educational needs, style of trading, and budget. Once you make sure that the broker you have chosen is fully regulated and authorized to operate in your country of residence, you should check a few crucial aspects of its work – spreads, fees, commissions, available trading platforms, supported payment solutions, etc.
If browsing through the multiple options currently available on the market is not your thing, you can take a look at the below selection of 10 reliable indices trading brokers and pick the one that meets your criteria.
- Min Deposit$0FeesSwap rates visible through MT4 or MT5 accountsCommissionsFrom $0SpreadFrom 0.3Leverage EU20:1Leverage non-EU100:1All financial products involve risk and you should ensure you understand the risk involved as certain financial products may not be suitable for everyone. Trading in margin foreign exchange and derivatives carries a high level of risk and you may incur a loss that is far greater than the amount you invested.
Fusion Markets is a first-class trading broker with sound licensing, a decent product portfolio, and an affordable fee structure. As regards stock indices that can be traded via this brokerage, they are AUS200, EuroStoxx50, CAC40, DAX, HK50, Nikkei225, Nasdaq100, FTSE100, Dow Jones, and S&P 500. Both minimum and average spreads are readily available for review while swap rates can be checked only through traders’ MetaTrader 4 or MetaTrader 5 profiles.
The only aspect in which Fusion Markets is rather inferior to some of its competitors is the platform’s educational content. The respective category in the form of a blog does not seem to be frequently updated. This fact is somewhat compensated by the customer care team which has a marked friendly attitude and readiness for an exhaustive explanation of any question that arises. What is more, via DupliTrade, you can copy the actions of selected prosperous traders and learn more about their successful strategies.
While exploring the offerings of Fusion Markets we did not spot any non-trading-related fees. This means you do not have to pay extra for making deposits and withdrawals, there is no inactivity fee and also no minimum deposit requirement. If you refer a friend to the platform, both of you will receive $50 in your trading accounts. Check T&Cs for further details.
- 2. eToroMin Deposit$10 - $200FeesOvernight fees from $ -0.00347067CommissionsNoneSpreadFrom 0.75Leverage EU20:1Leverage non-EU100:1CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 78% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.
In 2007, one of the best brokerage companies operating on the market today was founded – eToro. Their goal was more than ambitious – “to make trading accessible to anyone, anywhere” and about 15 years later, it seems that they have achieved it. eToro holds local licenses for the UK, EU, US and is also internationally regulated through eToro (Seychelles) Ltd. At least for now, however, index trading is not part of the US-authorized activities of the brand.
In the regions where trading of indices is legal, users can avail themselves of quite favorable trading conditions. Depending on the particular country of residence, the minimum deposit requirement varies between $10 and $200. We were pleased to find that eToro charges no commissions on any trade and when it comes to spreads they start from 0.75 which is considered competitive compared with other global trading brokers.
Among other features, this brokerage brand is famous for its social trading platform that works with the CopyTrader tool. It allows inexperienced clients of eToro to follow the profitable practice of top-performing traders. Various assessment parameters are available to help you decide which traders to copy. Knowledgeable users can also take advantage of CopyTrader as it enables them to closely interact with other experts and exchange ideas.
- 3. XM GroupMin Deposit$5FeesSwap rates between -0.07 and -3.87CommissionsNoneSpreadFrom 0.05Leverage EU20:1Leverage non-EU200:1CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 74.89% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
XM is one of the trading brokers with the largest client bases nowadays. According to data published on the brand’s website, the number of traders operating via the brokerage already exceeds 5,000,000 and XM’s team consists of over 600 professionals. This large-scale global operation is supported by sufficient licensing and customer care staff speaking over 30 languages. Just a tiny part of the awards won by brand is Best Trading Experience by Ultimate Fintech 2021, Most Reliable Broker by CFI.co 2021, and Best Customer Service Experience – Global by Global Business Awards 2020.
Currently, the broker is certified by the Cyprus Securities and Exchange Commission (CySEC), the Australian Securities and Investments Commission (ASIC), and the Institute Financial Services Commission (IFSC) in Belize. When accessing the company’s website from the EU, you can see that XM has registrations for outward passporting in the UK, Germany, Spain, Hungary, Italy, France, Finland, Poland, the Netherlands, and Sweden.
Index trading via XM is executed either in the form of cash indices CFDs or futures indices CFDs. The index selection available on this broker’s platform is not the most abundant one we have come across but it still includes the most popular indices – Dow Jones, S&P 500, FTSE 100, DAX, and others. Spreads vary between 0.3 and 16.0 except for USDX whose spread is as low as 0.05.
- 4. PepperstoneMin Deposit$200 (recommended)FeesOvernight fees:
2.5% for CDFsCommissionsFrom $0SpreadFrom 0.6 to 30.0Leverage EU20:1Leverage non-EU200:1CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75.9% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.
We are starting our review of top index trading brokers with Pepperstone, a leading brand with regulated operations in seven jurisdictions that enables trade execution via four top-notch trading platforms – MetaTrader 4, MetaTrader 5, cTrader, and TradingView. In addition to that, among the tools offered by Pepperstone, we find Capitalise.ai, which provides for code-free automation of the trading process.
Of the derivative trading instruments listed above, Pepperstone offers CFDs for stock indices, shares, exchange-traded funds, and currency indices. Furthermore, trades related to Forex, commodities, and cryptocurrencies are also enabled. For the maximum convenience of users, the broker has systematized pricing information in such a way that they need to make just a couple of clicks to see the spreads and applicable leverage. Currently, the brokerage’s portfolio includes 23 indices divided into 3 categories according to their regional focus. Spread values vary within the range of 0.6 and 30.0.
Pepperstone allows opening two types of accounts, Standard and Razor, and it is clear from their characteristics that novice traders, algorithmic practitioners, and scalpers are equally welcome. What is more, thanks to DupliTrade which is a well-known trading strategy marketplace, users can access signals coming from prominent strategy providers and thus gradually gain knowledge about profitable trading techniques.
- 5. AxiMin Deposit$0FeesAmendable future rolloversCommissionsFrom $0SpreadFrom 0.2Leverage EUUp to 30:1Leverage non-EUUp to 500:1Over-the-counter derivatives are leveraged products that carry a high level of risk to your capital. Trading is not suitable for everyone and may result in you losing substantially more than your initial investment. You do not own, or have any rights to, the underlying assets. You should only trade with money you can afford to lose.
Axi is an Australian trading broker that has gained an excellent reputation among users from many parts of the world. The brand’s operation is regulated by the two strictest regulation bodies in the industry – the Financial Conduct Authority (FCA) and the Australian Securities & Investments Commission (ASIC) as well as the Financial Services Authority (FSA) in Saint Vincent and Grenadines.
This brokerage company is one of the few that works with one trading platform only – MetaTrader4. This is somewhat offset by the fact that traders have a diverse selection of built-in analysis tools at their disposal that contribute to making well-founded decisions. These include Autochartist, MyFxBook, and PsyQuation. Registered users of Axi can also subscribe to MT4 VPS Hosting, a free service that guarantees the absence of disruptions due to technological or connectivity reasons.
As regards index trading through Axi’s platform, it is conducted in the form of CFDs. The portfolio of the brokerage comprises over 30 indices with options for both zero commission and extremely tight spreads provided. Trades can be executed either with index cash CFDs or index futures CFDs. The main difference is in the fees payable in case a position is held overnight. Futures CFDs are subject to rollover charges while with cash CFDs, there are no rollover payments, but at the expense of this, an overnight swap fee is to be charged.
- 6. City IndexMin Deposit$100 (recommended)FeesOvernight financing:
- long positions - equivalent base rate +2.5%
- short positions - equivalent base rate -2.5%CommissionsNo commission on CFDsSpreadFrom 0.6Leverage EU20:1Leverage non-EU200:1CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
We are putting an end to our selection of top index trading brokers with City Index, a highly competitive brokerage brand with almost 40 years of experience. Its long-term successful existence is primarily due to the provided profuse product catalog, reasonable pricing policy, and great educational resources. In terms of indices, City Index offers two ways of operation – spread betting and CFD trading. In this regard, it is worth mentioning that the broker was announced for Best CFD Provider at the ADVFN International Financial Awards 2022 and Best Spread Betting Provider at the Shares Awards 2021.
City Index allows you to trade 15+ stock indices including S&P 500, US Tech 100, Nikkei 225, Wall Street, etc. with spreads currently starting from 0.6. A click on an index symbol opens a new window with detailed information about its price movement, trading hours, minimum trade size, guaranteed order minimum, etc.
The standard City Index account gives commission-free access to more than 13,500 markets regardless if you prefer desktop, web, or mobile operation. The additional features include but are not limited to technical and fundamental analysis research portal, built-in newsfeed, and Smart signals. Although there is no minimum deposit to open an account, the broker does not recommend fundings of below $100.
- 7. XTBMin Deposit$0FeesSwap rates from -0.003266%Commissions$0 on Standard accountsSpreadFrom 0.012Leverage EUUp to 20:1Leverage non-EUUp to 200:1CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 78% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
If you are in search of a reliable cost-efficient index trading broker, XTB is definitely a brand you should pay attention to. The brokerage enables trading of 39 indices with the information about the relevant spreads, leverage, swap fees, trading hours, etc. being published in one place, allowing users to quickly assess whether the trading conditions suit them. To give you an idea of what to expect, we will tell you that at the time of writing, the UK100 index comes with minimum spreads of 1.4 and swap points (long/short) of -0.014419% / -0.007803%.
One of the distinctive features of XTB is the detailed and practically oriented educational content the broker provides. The respective section of the brand’s website is divided into subsections according to the available markets – indices, Forex, commodities, stocks as well as issues related to CDFs, ETFs, platform usage, and others.
Although it offers an in-house developed trading platform only, XTB has taken care of its clients not to be limited in terms of device. Those who prefer desktop trading can operate with xStation 5 which is a customizable trading platform characterized by a user-friendly interface and advanced carting tools. On-the-go traders are enabled to download XTB’s trading application from Google Play or the App Store and benefit from the same functionalities as the desktop platform.
- 8. IGMin DepositFrom $250FeesOvernight funding admin fees:
2.5 - 3%CommissionsFrom 0%SpreadFrom 1.0Leverage EU20:1Leverage non-EU200:1Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Options and turbo warrants are complex financial instruments and your capital is at risk. Losses may be extremely rapid.
IG is a low-cost index trading broker with almost 50 years of experience that provides a safe and secure trading environment across multiple asset classes and a total number of markets exceeding 17,000. In the trading circles, Stuart Wheeler, the founder of the company, is often referred to as the inventor of spread betting. Today the brokerage’s portfolio is far more diverse and encompasses barriers, vanilla options, CFDs, and turbo24s.
IG gives its users access to over 30 indices, both major and niche. From the brand’s website, we can see that index spreads start from 1 point and leverage is the usual for the market 20:1 within the EU and up to 200:1 for non-European countries. The licenses that IG holds allow the group to operate in almost any part of the globe, including the United States. Currently, US clients of IG are authorized to perform Forex trading only.
IG’s global approach is evident not only from its multi-jurisdiction licensing but also from the great variety of desktop platforms and mobile applications it supports. The brand’s trading platform enables spread betting and CFD trading with many perks like browser-based research tools for example, which are available via the relevant iOS and Android apps. The other options traders can operate with are PWA (progressive web app), MetaTrader 4, ProRealTime, and L2 Dealer.
- 9. CMC MarketsMin Deposit$0FeesAmendable holding costsCommissionsNoneSpreadFrom 0.5Leverage EU20:1Leverage non-EU20:1Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
Award-winning proprietary trading platform and mobile applications accompanied by MetaTrader 4, very strong licensing, and excellent customer support service, these are the three crucial aspects that make CMC Markets a top-notch global trading broker. Let’s first take a brief look at the platform and summarize its advantageous features and functionalities.
Next Generation is bursting at the seams with useful instruments that help you customize the platform and have a flawless index trading experience. There are more than 115 technical indicators and drawing tools and over 70 charting patterns to name just part of the platform’s advantages. Next Generation also has built-in price projection and pattern recognition tools and provides the opportunity to connect to the chart forum where you can communicate with other traders and the brand’s team of global analysts.
On-the-go trading is conducted through the in-house mobile app that can be downloaded and installed on both Android and iOS devices. It enables spread betting and trading of CFDs on about 11,500 markets and allows for advanced order ticketing. You can set a number of different alerts (prices changes, order notification, etc.) and thus eliminate the chance of missing an important event. Alerts can be received via email, SMS, or push.
- 10. TickmillMin Deposit$100FeesVariable swap ratesCommissionsFrom $0SpreadFrom 0.8 to 14.0Leverage EUUp to 20:1Leverage non-EU100:1CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 71% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd. You should consider whether you understand how CFDs or our other products work and whether you can afford to take the high risk of losing your money.
Tickmill is a trustworthy trading broker headquartered in the UK which enables trading of stock indices and oil, precious metals, bonds, cryptocurrencies, and stocks. As regards indices, the ones with the lowest minimum spread are USTEC and DAX (0.8) while the Hang Seng Stock Index (cash) comes with spreads of at least 14.0. No matter what the particular account type is, the minimum you can fund it with is $100. If you want to switch from retail customer status to VIP account status, however, your balance must be no less than $50,000.
The companies within Tickmill Group hold licenses issued by FCA (UK), FSA (Seychelles), CySEC (Cyprus), Labuan FSA, and FSCA (South Africa). Those traders who decide to set up accounts with the brokerage can choose mainly between MetaTrader 4 and MetaTrader 5 platforms and their variations. For example, MT4 users can try its WebTrader platform available directly on their preferred browsers.
In addition to the aforementioned trading platforms, the brokerage provides its customers with Tickmill Advanced Trading Toolkit by which they can upgrade MT4 and MT5 with 13 individual applications and 15 indicators. Realizing that traders may be still unfamiliar with the toolkit and its abundant features, the broker has summarized the most important information in a special guide, which is supplemented by a set of educational videos.