Indices are highly popular among traders for their deep liquidity and almost 24/5 availability, while investors with a long-term approach often add them to their diversified portfolios.
The best indices brokers offer a wide range of indices with low trading fees, and my listing includes everything you need to know before deciding if you should consider trading indices.
- ActivTrades, .
- AvaTrade, Highly regulated, choice of fixed or floating spreads.
- Plus500, multi-asset and CFD broker.
ActivTrades
In SummaryI rank ActivTrades among the best indices brokers as it offers transparent pricing via its commission-free cost structure and low swap rates on leveraged overnight positions. ActivTrades offers 19 cash indices and 18 swap-free index futures. The maximum index leverage is 1:200, and there is no minimum deposit requirement at ActivTrades. Traders can use MT4/MT5, the proprietary ActivTrader, or connect to TradingView to engage in social trading with 50M+ peers.
ActivTrades can execute 100K orders per second, while the average order execution is below 0.004 seconds. Traders also benefit from enhanced client protection with funds secured up to $1M.
Pros & Cons
- Demo Account
- Highly Regulated
- Low Spreads
- No Choice of Trading Accounts
AvaTrade
In Summary Highly regulated, choice of fixed or floating spreadsThe choice of indices and generous leverage of up to 1:200, depending on traders' geographic location, make AvaTrade one of the best indices brokers on my listing. Traders get competitive commission-free trading fees on indices, starting with a mark-up of 0.25 points for the S&P500. MT4/MT5 support algorithmic indices trading, but AvaTrade also offers its proprietary WebTrader and mobile app AvaTradeGO with Trading Central services.
AvaTrade provides beginners with its MT4 Guardian Angel plugin and the fee-based Ava Protect insurance policy shielding against losses. The high-paying partnership program features 70,000 registered partners and $250,000,000+ in commission payouts.
Pros & Cons
- High quality educational offering via AvaAcademy
- Excellent choice of trading platforms catering to various trading needs
- Broad asset selection and cross-asset diversification opportunities
- Well-regulated and trusted broker with oversight from a central bank
- Trading costs competitive but nothing special
Plus500
In Summary multi-asset and CFD brokerPlus500 offers commission-free indices trading with spreads from 0.70 points on the S&P500. It also has the VIX and an NFT index. Traders can manage their indices with the user-friendly, web-based proprietary trading platform and mobile app, which only supports manual trading but includes a great sentiment-based indicator. Qualifying traders receive an invite-only premium service, placing Plus500 among the best indices brokers regarding rewarding activity.
Beginners receive quality research via the data-driven analytical tool +Insights. Plus500 also publishes ESG scores and provides real-time email, SMS, and push notifications based on price alerts, percentage-based hourly and daily price changes, and sentiment changes.
Pros & Cons
- Broad asset selection in equities and options
- Free and unlimited demo account
- Advanced free-of-charge analytical trading tools
- Global and regulated fintech platform
- Sub-standard trading platform without support for automated or social trading
| | | |
Regulators | N/A | ASIC, BVI, Central Bank of Ireland, FFAJ, FSCA, KNF, MiFID | ASIC, CySEC, FCA, FMA, FSCA, MAS |
Year Established | 2001 | 2006 | 2008 |
Execution Type(s) | Market Maker | Market Maker | Market Maker |
Minimum Deposit | |||
Average Trading Cost EUR/USD | 0.8 pips ($8.00) | 0.9 pips | 1.3 pips |
Average Trading Cost GBP/USD | 1.3 pips ($13.00) | 1.5 pips | 1.7 pips |
Average Trading Cost Gold | $0.36 | $0.29 | $0.34 |
Trading Platform(s) | MetaTrader 4, MetaTrader 5, Proprietary platform, Web-based | Other, MetaTrader 4, MetaTrader 5, Proprietary platform, Web-based+ | Proprietary platform, Web-based |
Islamic Account | |||
Negative Balance Protection | N/A | ||
| Visit Website | Visit Website | Get Started Visit Website80% of retail CFD accounts lose money |
What is Indices Trading?
Indices trading, as offered by the best indices brokers, involves trading a basket of stocks grouped regionally, by sector, or thematically. It decreases risk and profit potential compared to individual stock picking.
The Two Most-Used Methods of Calculating the Index Value
- The market capitalization weighted method, where the most capitalized companies have the most notable impact on price action.
- The price-weighted method, where the price move influences the index, allows even the smallest company to take price action if its price changes dramatically.
Most indices follow the market capitalization-weighted method, which more accurately reflects the economic strength of their respective economies, sectors, or themes.
How Indices Trading Works for Traders and Brokers
Trading with the best indices brokers materializes via derivatives and not by owning the underlying asset.
The Three Most-Traded Index Derivatives
- CFDs - most non-US-resident traders will trade index CFDs, which mirror price action 1:1 and are the best asset for traders.
- Options - traded mostly by US-resident traders, as they cannot trade CFDs.
- Futures - pre-dominantly traded by institutional traders.
Noteworthy:
- ETFs have surged in popularity, with 10,000+ global ETFs offering a broad-based choice of regional or thematic indices.
What is the Minimum Deposit to Trade Indices?
The minimum deposit to trade indices depends on broker requirements. The best indices brokers often ask for a $100 minimum deposit to open an account but recommend more capital, as $100 does not suffice to manage an efficient or effective portfolio.
Is Synthetic Index Trading Better Than Stock Index Trading?
One asset class or sub-class is not better than another class or sub-class, as it depends on individual preferences and requirements. The best indices brokers will offer a combination of synthetic and stock indices.
Who Should Trade Synthetic Indices and Why?
Synthetic indices are instruments created using a mathematical formula to simulate market dynamics instead of deriving their value from actual assets, like stock indices. They are ideal for advanced traders seeking specific sector or thematic exposure. ETFs are the go-to method for trading synthetic indices, but some are available as outright indices like the VIX, the US Dollar Index, or the Philadelphia Semiconductor Index.
Who Should Trade Stock Indices and Why?
Stock indices are an excellent choice for all types of traders and a solid entry point for beginners. They are straightforward to analyze due to plenty of historical data, simple to trade, and available at most brokers.
Is Index Trading Regulated?
Index trading is not regulated, but the best indices brokers offering index trading are regulated. Traders should always double-check a broker's regulatory status and avoid unregulated brokers, even if they promise superior trading conditions.
The Most Traded Stock Market Indices
The list of the most-traded stock market indices changes annually but features many of the same names in different places. The best indices brokers provide traders with most of the indices on the list below.
The most-traded stock market indices according to the latest available data:
- NASDAQ 100 - Average daily volume of 5.737 billion.
- S&P 500 - Average daily volume of 4.996 billion.
- Hang Seng - Average daily volume of 2.929 billion.
- FTSE 100 - Average daily volume of 905.890 million.
- Dow Jones Industrial Average - Average daily volume of 393.460 million.
- DAX 30 - Average daily volume of 77.469 million.
- Russell 2000 - Average daily volume of 49.965 million.
- CAC 40 - Average daily volume of 47.827 million.
- Euro STOXX 50 - Average daily volume of 39.468 million.
- Bovespa - Average daily volume of 9.842 million.
Trading Indices - Pros & Cons
Before trading with the best indices brokers, traders should consider the pros and cons of indices trading.
The Pros of Indices Trading
- Decreased risk.
- Less volatility.
- Many sector-and-thematic-based choices.
- Diversification.
- Hedging potential.
The Cons of Indices Trading
- Decreased profit potential.
- Not all indices are created equally.
Bottom Line
The best indices brokers provide traders with an excellent infrastructure, including choice of indices, leverage, trading fees, algorithmic trading, and additional tools to ensure a competitive edge.
