Index trading is trading in the stock indices of different countries. These are popular form of CFD trading. Stock index is a statistical indicator that measures the combined value of underlying stocks. If the stocks of a country perform better the index goes up, while if some or many of the stocks do not perform well, the index goes down. Any change in the stocks of an index is reflected on the index. These ups and downs make index trading an attractive option.

Index trading can be done in the immediate market for short term or in future market. Irrespective of one's nationality, trading can be done in the stock index of any country, such as Australia 200, FTSE 100, US SPX500, Wall Street, Japan 225 and many more. Trading can be done 24 hours of the day. If one cannot check the indices during working hours, trading can be done during evening or whatever your free time. For those who are knowledgeable about a sector, there are many choices available. They are free to trade in the index for the particular sector, such as banks, chemicals, engineering, oil and gas, software and computer services, transport, or any other sector.

In order to be a successful index trader, one needs to follow the economic indicators of the country; study charts; review broker or third party research and opinions; review countries performance; and check statistical analysis. This helps one to judge the performance of a stock index better and helps in making the right decision.

In order to carry out index trading, you need a trading account with a CFD trading service provider. Once a trading account is set up, you select the stock index you would like to trade in, and buy the CFD for that particular stock index. Stock index CFDs are a better option for trade because the initial capital outlay is just a fraction of the total value. CFDs are contracts for difference. So you would be required to pay only the difference in order to buy the stock index CFD. After you sell the index CFDs, the difference and commission or brokerage, if any, is taken into consideration, and the profit is transferred to your account.

The risk in index trading is considerably reduced as compared to trading in an individual stock. The chance of a country's index going bankrupt or showing deep loses is nearly impossible, whereas it is very much possible in the case of an individual company. Also, since there is a cyclical sectorial performance, the index usually remains within a range thus reducing the risk of an index trader. During CFD trading in order to limit your loss, you can set guaranteed stops or limits. If the index price goes low, the stop limit is executed and your losses are contained. You can go short and cover up the position, or you can go long on a particular index and sell when the price goes higher.

Index trading can be hugely profitable, giving exponential profits especially in a booming economy. You only need to be alert and monitor the economic activities and take appropriate decisions to cut down losses or book profits. However, if it is ignored or if you get into the market without a good knowledge of trading in indices, you may suffer losses.