WHY SHOULD YOU TRADE INDICES?

Gain insight into the performance of an asset class or a segment of that asset class.
Leverage

With shares you need a decent amount of capital to trade the blue chips of the world. Imagine buying shares in companies like CBA which are close to $100 per share. If you wanted to trade that for a quick gain you would need to trade $1000 and expect it to move 10% to make just $100 from it. However if you trade indices you can trade the top 200 stocks in the market with only a small outlay.

Example of trading with leverage

With CFD trading, you would only have to deposit a small percentage of the total trade value whilst being able to maintain the same level of exposure. You believe the Australia 200 will rise and decide to buy 10 CFDs at a price of 4000. Over the course of the week the Australia 200 goes on a nice run up due to a majority of the blue chip sectors releasing great end of year results. Our new price of the Australia 200 CFD is 4010/4011. Having reached your profit target, you decide to close your position by selling 10 CFDs at 4,010 (our sell price).

Result

The opening (notional) value of the CFD trade is $40,000 (10 CFDs x 4010). The closing (notional) value of the CFD trade is $40,100 (10 CFDs x 401). This nets you a $100 gain ($40,100 – $40,000).

Alternative scenario

If however, the price of the Australia 200 had fallen to 3990, you would have lost $100 (4000-3990 x 10 CFDs). In your opinion, if you think the market will rise or if you think the market will fall you can still trade the markets. Hedging is an option during uncertain times. When the market falls people with a share portfolio for example tend to panic. However, some will trade CFD’s indices to hedge their share exposure. As the market is going down you will sell a small amount of contract and for every point that it moves you will start making money which means you are covering your short-term losses on your shares.

Klimex Capital Market Indices

CONTRACT PLATFORM SYMBOL TYPE MARKET VOLUME VALUE/ PER TICK E.G FOR TICK VALUE PER TICK 1 % MARGIN MAX LEVERAGE MIN VOLUME MAX VOLUME
ASXS&P 200(Future) SP1200 CFD SFE/ASX 1 AUD$1 6231-6232 1% x (1 x market price) 100:1 1 500
FTSE 100(Future) FTSE100 CFD LIFFE/Euronext 1 GBP1 4652>4653 1% x (1 x market price) 100:1 1 500
DAX30(Future) DAX30 CFD Eurex 1 EUR1 5217>5218 1% x (1 x market price) 100:1 1 500
Dow Jones30 (Future) DJ30 CFD CBOT/CME 1 USD$1 12370>12371 1% x (1 x market price) 100:1 1 500
S&P (Future) SP500 CFD CME 1 USD$1 1262.5>1263.5 1% x (1 x market price) 100:1 1 500
Nikkei225 (Future) Nikkei225 CFD Asia Simex 50 JPY50 3472>3473 1% x (1 x market price) 100:1 50 20000
USD Index (Future) USDX CFD ICE 1 USD$1 85.750>85.760 1% x (1 x market price) 100:1 1 500