Find out the purpose of major and minor stock indices and how they are compiled. Learn how to gain exposure to these volatile markets through some of the most popular trading products in the world. All of the major stock indices have corresponding futures contracts that are traded on a futures exchange. The E-mini Dow is the main futures contract on the Dow Jones, for example.

Index futures are essentially the same, and trade in the same way, as all other futures contracts.

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This means that you are buying the index at a fixed price now, for expiry on a set date in the future. You would do this if you expected the price of the index to rise between now and the expiry date, so you could profit by selling for a higher price than you paid.

This would mean that you are selling the index at a fixed price now, for expiry on a set date in the future. You would do this if you thought the price of the index would fall between now and the expiry date, so you could then profit by buying at a lower price. Like other futures markets, index futures trade on leverage: So if the E-mini futures price is at If the market moves against you, you might need to add additional funds to maintain the necessary margin.

Ticks are the minimum price movement of a futures contract. As a form of derivative, futures can fit into your overall trading strategy. In volatility trading, for instance, the aim is to take small but regular profits from a volatile market. If you have a portfolio of shares, you can limit your exposure to unwanted risk by opening an opposite position as an index future. So if you had a number of long shares positions, you could take a short position on the relevant index future.

This would help you to offset any losses if your shares moved against you. Being leveraged products, stock index futures give you exposure to a stock market or sector as a whole for a much smaller amount of up-front capital, and without having to purchase the individual constituent shares directly.

Futures contracts are standardised by the exchange, which mean you must trade in a certain size. This size might not exactly match your needs, especially if you are hedging an existing portfolio. As you are dealing with such a high-value and volatile asset, you're likely to need to put down a fairly substantial figure as your margin payment.

All forms of investments carry risks.

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Trading index futures Why trade stock index futures? Limitations CFDs Digital s Futures. Index futures are the primary way of trading stock indices. Taking a long position This means that you are buying the index at a fixed price now, for expiry on a set date in the future. Taking a short position This would mean that you are selling the index at a fixed price now, for expiry on a set date in the future.

Ticks Ticks are the minimum price movement of a futures contract. Why trade stock index futures? Short-term trading As a form of derivative, futures can fit into your overall trading strategy.

Hedging against losses If you have a portfolio of shares, you can limit your exposure to unwanted risk by opening an opposite position as an index future. Investing Being leveraged products, stock index futures give you exposure to a stock market or sector as a whole for a much smaller amount of up-front capital, and without having to purchase the individual constituent shares directly.

Standardisation Futures contracts are standardised by the exchange, which mean you must trade in a certain size. Margin rates As you are dealing with such a high-value and volatile asset, you're likely to need to put down a fairly substantial figure as your margin payment.

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