Stocks indices are primarily traded on the futures market. The main advantage is that you don’t put all your eggs in one basket like if you were trading a single stock. Stock indices include the price of several stocks which makes them safer because your risk is diversified.
Therefore, you actually should include indices in your overall trading game plan. However, trading indices with futures might be too difficult for the average private investor. You need a lot of money and sufficient market knowledge.
Luckily, you can also invest in stock indices with stock binary options. Actually, you can invest in indices with binary options in a much easier way: You are betting on the price development of a particular index like the S&P 500. If you think that the price of the S&P 500 will go up until the end of the day, you can easily buy a call binary option which expires at the end of the day. If the price goes up, you win. If you think that the price will go down, you simply buy a put option.
What is a stock index?
A stock index is an index in a specific market. The index is an indicator that represents the development of its underlying stocks. For example: The S&P 500 represents the value of a basket of the 500 biggest companies in the US. The Dow Jones 30, S&P 500, Japanese Nikkei 225, British FTSE 100, French CAC40 and German DAX 30 are the most important stock indices worldwide.
