Stock index trading is a fast and efficient way to trade entire sectors or even entire markets. It is very easy to do with an online stock trading system. There is a relatively new investment vehicle called ETF’s, also known as exchange traded funds, that allow you to do this very easily with stock market trading.
ETF’s are a basket of securities, much like a mutual fund, that you can trade on the open exchange, just like any other stock. Unlike mutual funds, all you pay in fees is the trading commission, and you can trade them all day long instead once at the end of the trading day.
There is an ETF for virtually any grouping of securities you want to trade. If you want to trade the S&P 500, for example, you can use the SPDR S&P 500 ETF (SPY). This index trading asset tracks all of the companies in the S&P 500 and weights each stock the same as the index.
There are also ETF’s for commodities. If you are reticent to trade on the futures market, you can used commodity ETF’s to trade this sector on the stock market.
In addition, there are ETF’s for foreign currencies as well. The forex market is one of the riskiest trading venues in the world. But it is also the largest financial market in the world. Using forex ETF’s can allow normal investors and traders to play this market without leaving the stock market.
Let me give you an example of what index trading could look like right now. The Fed is currently instituting a monetary policy of keeping borrowing cheap. This action is causing the stock market (equities) to rally.
This is also causing the USD to decline in value and other foreign currencies to rise. The decline in the USD is also causing the commodity market to climb because most commodities are denominated by the USD, making them cheap.
So you can go long on the S&P 500 with a SPYDR ETF, go short on the USD with a USD ETF, go long in other currencies, and go long in a variety of commodity ETF’s. In the current market climate, this is one way you could use index trading to your advantage.
Another great thing about this is that you can do it all on an online stock trading account. You simply sign up for a single account with an online broker and you can do all of the index trading you want.
If you need more of a primer on trading and investing, go to stock market basics where you can find a good introduction. It will give you an overview of modern stock market trading today.