Trading US indices: S&P 500, Nasdaq and the Dow

US stock indices are the second most traded CFD group after gold. They trend more cleanly than
currency pairs and are less disturbed by monetary headlines, but they have a cost structure of their own
that needs understanding.

1. Three main indices and their characters

S&P 500 (US500)

The 500 largest companies, and the best representation of the US market. Moderate volatility, smooth
trends. The most suitable index to start with.

Nasdaq 100 (NAS100)

Technology-heavy, with the weight concentrated in a handful of very large companies. The most
volatile of the three and the most rate-sensitive — growth stocks are repriced heavily when
rates move.

Dow Jones (US30)

Thirty companies, weighted by share price rather than market capitalisation. That structure makes its
behaviour drift somewhat from the other two. Tilted towards industrials and traditional finance.

2. The hours that matter

In UTC, winter time:

• 14:30 — the US market opens. The highest volatility and liquidity of the day.
• 14:30 to 17:00 — the best trading window, with the tightest spreads.
• 21:00 — the close. Often volatile as funds rebalance.
• Outside those hours — brokers still quote, but liquidity is thin and spreads
  wide.

3. Cost structure

• Spread is quoted in index points.
  Contract size differs between brokers, so you have to
  read the specification to convert it into dollars.
• Overnight financing — on a cash
  index, long positions usually pay every night. In a high-rate environment this is significant for anyone
  holding for weeks.
• Dividend adjustments — when constituent shares pay a dividend, the account is
  credited or debited accordingly. Not a fee, but it appears on the statement and regularly causes
  confusion.

4. What moves US indices

• Rate expectations — the dominant
  factor. Falling rates usually help equities, growth stocks especially.
• Earnings season — four times a year, running for several weeks. Results from a few
  very large companies can move the whole index.
• US economic data — though the reaction is sometimes counter-intuitive: data that is
  too strong can send equities down, because it pushes rate expectations up.
• Global risk aversion.

5. Cash or futures

Many brokers offer both. Choose by holding period:

• Short-term trading → the cash version, with a tighter spread.
• Holding for weeks → the futures version, with no nightly financing.

6. A note on position size

Index contract sizes differ considerably between brokers — which makes comparing spreads between two
brokers impossible to do directly. Always convert to dollars per point per lot before
comparing.

This article is for information only and is not investment advice. Conditions and fee levels are published by the brokers and can change at any time — check with the broker you actually use. Leveraged forex and CFD trading carries a high level of risk and can cost you your entire deposit.