Indices are especially popular among novice traders: these financial instruments allow you to trade an organized basket of stocks without the need to build a specific portfolio. There are major indices which represent entire markets as well as minor ones that allow you to invest in certain sectors. You can use indices to trade other assets like bonds as well. In this Traders Union article, we explain the basics of how indices really work and tell you about the top 3 reliable brokers for trading them.
How indices work
Indices are financial tools that represent an entire basket of certain securities, usually stocks. Traders use them as a convenient way to invest in a large array of securities selected based on certain criteria like industry sector or business size. The most popular indices are used to monitor the performance of the entire economy: for example, the S&P 500 includes the top 500 public companies, and it’s usually used to evaluate the well-being of the US stock market as a whole.
Indices are often used as benchmarks: they allow you to see whether your investing portfolio performs better than the market or not. Stock indices are not the only type of indices you can find on the market since there are indices for bonds, commodities, currencies, and other assets, too. However, not every broker out there will allow you to trade indices, and each of them has its own conditions. That’s why it is incredibly important to know the best brokers for trading indices and work only with them.
Founded in 2007, eToro is one of the most well-known brokers in the world. It’s especially popular with novice traders for its extremely effective social trading features, but it’s also very convenient for active trading. The broker features a variety of available trading instruments, low spreads, and relatively low commissions. Moreover, it’s known to be secure and well-regulated.
Pepperstone is an Australian broker founded in 2010 by a team of professional traders. It’s extremely secure, technologically advanced, and well-regulated. Pepperstone allows you to trade a wide variety of CFDs on various assets with relatively low fees.
AvaTrade is a very popular European broker that operates all across the world. It has a wide range of instruments, attractive trading conditions, and a good educational program for beginners who want to start trading.