Not planning on trading indices too much but thought I’d have a practice on the FTSE 100 to see how the stops and placing an order works. Once I was in credit and saw it was the Dow Jones pulling it up and my FTSE spreadbet was safe I thought I’d move my deposit to there and run them side by side. Best not get carried away, but starting with a profit is always nice (however small).

Stock indices are one of the most popular areas of spread betting. Bets on indices appeal to:

• the pure speculator,
• the technical trader who watches stock market charts,
• and to some private investors who think they can see a big market move coming but do not want to disturb their underlying share portfolio.

Be warned that I don’t know too many private traders who make a living out of indices although obviously can be done. Don’t know quite why but what is the edge?

Spread betting companies offer spreads on many stock index bets including:

• Daily closing levels for the FTSE100 index and Dow Jones Industrial Average and other international indices.
• Futures for the FTSE100 index and Dow Jones and other international indices, expiring around the middle of each month.
• Daily closing levels for futures in the FTSE100, Dow Jones and S&P index and major European indices.
• Monthly futures for many other indices, including the S&P500 Composite, the NASDAQ 100, the French CAC40, the German Dax, the Japanese Nikkei 225 and the Hang Seng index in Hong Kong.
• The points differential between certain indices at a particular futures expiry date. Examples are the differential between the Dow and the FTSE, and between the FTSE and the Dax.

Spread Betting Indices

• How to Spread Bet the NASDAQ
• Spread Betting the S&P 500 index
• Spread Betting the CAC 40 (France Index)
• Spread Betting the FTSE: Footsie 100 Trading

I think index day trading is very hard. Here’s my slightly weird way of looking at it:

1. A single stock’s price movement intraday can be fairly random.
2. An Index that consists of a total summation of 100 Stocks movement is going to be even more random!!!

Example of an Index spread trade -:

• Tom Technician sees a change of trend taking shape on his charts.
• The FTSE100 index reached a record high of 7510 a month ago and has just failed to break through this level for a second time.
• His system shows that a new 40 day low has taken place.
• Tom’s spread betting company is offering a spread of 7445-7457 on the September FTSE.
• Tom backs his system and makes a £30-a-point down-bet on the FTSE 100 index. For safety, he arranges a guaranteed stop at 7942, to limit his potential losses to £15,000.
• His break-even level for the September FTSE is 7442, the bottom of the spread minus three points given up in return for the guaranteed stop.
• Some 10 days later and a big fall overnight on Wall Street sends the FTSE spiraling down 250 points. The spread betting company’s spread for the September FTSE now stands at 7190-7202.
• Tom decides to hang on a bit longer for a bigger fall, even though he is now £7200 in profit (7442 minus 7202, times £30).
• Two days later, the FTSE 100 index shows signs of stabilising, and the September spread moves back up to 7247-7259.
• Tom’s trailing stop loss is hit and he decides to take his profits before the rebound in the index goes any further. His profits are £5490 (7442 minus 7259, times £30).

All licensed spread betting companies offer comprehensive guides describing the important aspects of each particular market.