Index CFDs related questions
Index CFD generally refers to Contract for Difference on stock indices, reflecting the price changes of stock indices and incurring profit or loss due to fluctuation. Compared to individual stock investments, stock indices represent the trends of a group of representative stocks, serving as a barometer for a specific industry or even the overall economy of a country. For example, the Germany DAX 30 index consists of 30 representative blue-chip stocks, reflecting the overall performance of the German stock market. Through index CFDs, complex assessments of individual stocks can be simplified to analyse the overall market sentiment, diversify risks, and avoid extreme price fluctuations in individual stocks.
Index CFDs allow traders to speculate on global stock indices. EBC selects major global indices, including the Dow Jones Index, DAX 30 Index, STOXX 50 Index, S&P 500 Index, Nikkei 225 Index, and more. With just one EBC account, traders can build exposures to numerous markets globally and achieve success with EBC's competitive spreads and flexible leverage.
EBC provides up to 100x leverage for index CFD trading, which is the maximum leverage ratio allowed within compliance and regulatory limits. This takes into consideration a balance between safety and capital efficiency.
Different indices correspond to different contract sizes. EBC offers CFDs on major global stock indices, with contract sizes of 10 for 100GBP (UK FTSE 100), 200AUD (Australia S&P/ASX 200), CNIUSD (China A50 Index), D30EUR (Germany DAX 30), E50EUR (Europe STOXX 50), F40EUR (France CAC 40), HSIUSD (Hong Kong 50 Index), NASUSD (US Nasdaq 100 Index), and U30USD (US Stock 30 Index). For 225JPY (Nikkei 225 Index) and SPXUSD (S&P 500 Index), the contract size is 100. The minimum contract size for index CFDs is 0.1 lots.
Increased capital efficiency: index trading usually involves lower leverage, but index CFDs allow participation with less capital. However, it's crucial to manage your position when engaging in leveraged trading.
Bidirectional trading: a stock index reflects the overall direction of a stock market. Through index CFDs, traders can engage in both long and short trades, providing greater profit potential.
Risk diversification: Stock indices are often composed of a selection of the most representative stocks in a market. The movement of a single stock may not directly impact the index, effectively diversifying market risk.
As index CFDs reflect the trends of a group of stocks, attention should be focused on the overall market rather than specific components. Generally, stock indices are directly correlated with central bank monetary policies and a country's economic situation. For example, if a central bank implements a contractionary monetary policy, concerns about a lack of liquidity may suppress the stock market. Similarly, poor economic data can lower market investment expectations, thereby affecting the stock market.
