What Are Indices and How Can Beginners Start Trading?

Index (INDs) trading is usually understood as operations with a portfolio of assets, that is, actions with a group of stocks combined by some attribute (factor): economic sector, regional enterprises, country or trade union, production volume, success of companies, and so on. Novice traders often ask if it is possible to gain access to financial markets without investing in assets (raw materials, bonds, stocks) of individual enterprises. It turns out that this is achievable, and INDs should be used for this. In other words, it is best for beginners to trade an index fund (ETF) or a basket of stocks, avoiding buying shares of individual companies.

The stock index reflects the state of a group of large enterprises, so we can talk about diversification – that is, when you buy IND, your money is invested in several enterprises at once. This increases the security of your capital. Everyone knows that there are INDs that reflect the state of the country's economy. An example is the US500, which includes half a thousand companies registered in the United States. This index is constantly growing, indicating that the country's economy is developing in general. The problem is that the growth of the US500 is too slow, and you can only make money on it over a long distance.

If you are in Europe, then you might be interested in the N100 index, which is focused on 100 organizations located in different countries of the European Union. The British FTSE100 index is also in demand. If we are talking about Asia, then the well-known indexes are J225 (Japan), HK50 (Hong Kong). All the listed INDs are called benchmarks, that is, the main ones. Of course, there are many secondary INDs that are based on the underlying ones and have higher volatility. It is interesting to know that fund managers often rely on INDs to assess the effectiveness of active funds. There are also passive index funds where investors can buy or sell derivatives (such as futures).

Trading Courses for Newcomers

To successfully trade INDs, it is recommended to complete the indices trading courses offered by AvaAcademy. You will get access to materials (articles, videos, audio) that will help you get familiar with trading on the stock market and explain what indexes are and how you can make money with them today. You can choose the time for classes yourself and determine the course volume for yourself. It doesn't matter what level you are at; both newbies and market experts are accepted for trading courses. Let's list the main advantages of AvaAcademy courses below:

• free registration and training;
• dynamic and informative course;
• student chooses the class schedule;
• practical advice from experts;
• examples of trading indexes, etc.

After completing the courses, you will be able to register on the broker's website and start making your first bets. You can buy benchmark CFDs indexes and sell them when the price has risen. Opening long positions is more common, but you will have to wait for the economic sector to show growth. On the other hand, the probability of your losing is low, as the US500 and J225 are almost always rising. By the way, CFDs make it possible to trade with margin, meaning you can invest more with a small start-up capital. In this case, part of the money for the purchase of the IND will be borrowed from the broker. Please note that your potential income increases, but the risks also become greater. Beginners are not recommended to use large leverage to secure their start-up capital.

How to Trade CFDs

First, you need to select a broker offering CFDs trading and open a trading account. You will have to register beforehand and fill out a form with your details. Don't worry, your personal information will be hidden from outsiders. Then, you create a CFD account. You would choose an index according to your taste. We recommend that you try to start with the most reliable one, such as the S&P 500. It is necessary to identify trends and try to predict price fluctuations. You should open the first trade using the following tools: stops, limits, and take profit orders. Don't forget about risk management. It is recommended to use different types of analysis to control your trading. Finally, you will close the position according to your strategy.

ETFs

Imagine that an ETF fund has bought various assets, thereby building up its portfolio. The fund issues its own securities that are part of this portfolio and offers to buy them, while the price of stocks corresponds to the nominal or slightly different price. In simpler words, you can buy shares of an ETF fund and earn safely on index price changes. If you are just starting to trade stock indices, then it is best for you to start with ETFs because this is an extremely simple and intuitive method (you can always look at the chart and see price deviations). You can learn more about ETFs trading at the trading courses that are available for free at AvaAcademy.