Since finance markets are now mostly digitized, it is possible to trade currencies and stocks from the comfort of one’s home. However, there is another tool gaining traction in South Africa. With a credible broker like Alpari International, you can profit from buying and selling indices. Here is how to make money from NASDAQ, FTSE 100, and the like through indices trading Nigeria you can take advantage of.
Indices may be traded in the form of contracts or CFDs. In some respects, CFD trading is similar to the currency exchange trade. For example, there are both long-term and short-term strategies. There are, however, important differences setting it apart from Forex trading.
Each stock indice, or index, reflects the average value of the stocks it comprises, based on their performance. These values may be traded openly, which is exactly what the activity involves. Hence, a trader of CFDs analyzes the direction over a certain period and opens positions to acquire profit.
As a CFD trader, you will be accessing the global market through cutting-edge software that is also used in Forex – MetaTrader 4 or 5. The platform allows you to open positions electronically, with no need for physical exchange. The financial flows will be handled by the broker that registers your account and provides around-the-clock support.
Another feature shared with currency trading is the absence of actual physical assets. Instead, you derive monetary gains from shifts in the price of your chosen indices. Thus, the speculation is purely price-based, with no actual ownership. This distinguishes both types from conventional stock trading when actual shares are owned.
CFDs have other obvious benefits in comparison with conventional stock trading. Rather than dealing with individual stocks and monitoring performance for each, you invest in a package solution. This lowers the potential risks and boosts your chances of sizable returns.
These are grouped by different criteria. Some, such as the German DAX 30, belong to a single country. Others describe a group within a country (for example, the American S&P 500). Some are sector-related (for instance, NASDAQ represents stocks from the tech sector).
The price and value of each indice can move up or down, causing changes in the average value of the stocks included in it. This forms the core of profit generation. Today, the technology stock is regarded as preferable thanks to the demand for the products and services provided by tech giants. Hence, Apple may actually make you richer, aside from causing you to splurge on the latest iPhone model.
Through a single contract for difference, you gain from positive changes in prices of all stocks in the set. This explains why the scheme is preferable to sales of individual stocks. In addition, the broker allows trading on leverage or margin. This means you may use a portion of borrowed funds to maximize the returns.
In terms of strategies, CFDs allow both long-term and short-term strategies. These are known as long-term, intra-day, and swing methods. Importantly, even short positions taken on CFDs entail less risk than short-term positions on stocks.
CFD players also take advantage of long trading hours. Closing a position may be done in several ways. Like in Forex, there are take profit and stop loss tools. Alternatively, you may simply exit the market. Meanwhile, you need not worry about expiry dates and other tiny details complicating the process for options traders.
If the concept of CFDs still seems daunting, you will be surprised by the relative ease of learning. Even though the values involved are affected by business sector trends or commodity price shifts, it is not overly complicated. In fact, experts agree that learning to trade CFDs is less difficult than delving into futures or options.
Simple googling reveals a wealth of educational content online. Most of these courses and tutorials are available for free. Moreover, reputable brokers like Alpari International make sure their clients have ample educational resources that facilitate training.