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An easy way to trade international indices

by , 20 May 2015

If you want to broaden your trading horizons to include international indices, you don't have to worry about opening an offshore trading account.

You can trade these indices using contracts for difference (CFDs).

Let's take a closer look at how it works…


Trading indices using CFDs


CFDs aren’t just for trading stocks. You can also use them to trade indices.

The advantage of trading indices is you can trade the overall market trend. Many traders find this an easier approach than analysing specific stocks.

As well as being able to trade the main indices of the Johannesburg Stock Exchange, you can also trade international indices. This includes the likes of the Nikkei in Japan, the DAX in Germany and the FTSE 100 in the UK.


How trading international indices works with CFDs


When you trade international indices using CFDs, you use a market maker. A trading company creates a market for you to trade.

Trades are all denominated in rands, so there’s no need to worry about taking your cash offshore.

Just like with CFDs based on shares, trading indices involves an arrangement between two parties to exchange the difference between the opening and the closing price of a contract.

So a buyer of CFDs receives the difference in the value of a specific index if it rises. And a seller of CFDs receives the difference in the value of a specific index if it falls.

Another way of trading CFDs on international indices is to trade the locally listed exchange traded fund (ETF). Through JSE listed ETFs, you can trade many different international markets. Your stock broker may offer this facility.

So there you have it. An easy way to trade international indices.

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