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Forex Index Trading

Forex index trading allows investors to speculate holistically on the value of a currency rather than trading a single currency pair. This guide will compare trading currency pairs vs forex indices, popular strategies, and how to find the best brokers for currency index trading.

Currency Index Brokers

These are the 10 best brokers for trading currency indices and the indices they offer:

  1. AvaTrade - USD
  2. Pepperstone - USD, EUR, JPY
  3. XM - USD
  4. Eightcap - USD
  5. CityIndex - USD
  6. DNA Markets - USD
  7. eToro - USD
  8. InstaForex - USD
  9. IG - USD
  10. Vantage - USD

#1 - AvaTrade

Why We Chose AvaTrade

AvaTrade is a leading forex and CFD broker, established in 2006 and regulated across 9 jurisdictions. Over 400,000 users have signed up with the broker which processes over 2 million trades each month. The firm offers multiple trading platforms, including MT4, MT5, and a proprietary WebTrader. 1250+ financial instruments are available for day trading, alongside a comprehensive education center and multilingual customer support.

"AvaTrade offers the full package for short-term traders. There is powerful charting software, reliable execution, transparent fees, and fast account opening with a low minimum deposit."

- DayTrading Review Team
  • Instruments: CFDs, Forex, Stocks, Indices, Commodities, ETFs, Bonds, Crypto, Spread Betting
  • Regulator: ASIC, CySEC, FSCA, ISA, CBol, FSA, FSRA, BVI, ADGM
  • Platforms: WebTrader, AvaTradeGO, AvaOptions, MT4, MT5, AlgoTrader, TradingCentral, DupliTrade
  • Minimum Trade: 0.01 Lots
  • Leverage: 1:30 (Retail) 1:400 (Pro)

Currency Indices

AvaTrade only allows for trading on the USD currency index.

Pros

  • The broker offers reliable 24/5 multilingual customer support with fast response times during testing
  • The broker’s unique risk management tool, AvaProtect, protects against losses up to $1 million and is easy to activate in the platform
  • AvaTrade is a heavily regulated and trustworthy broker with licenses from the ASIC, CySEC and more

Cons

  • There’s an above-average $50 inactivity fee after three months, though this won't impact active day traders
  • It’s a shame that there are no rebate schemes for serious traders looking for additional perks - CMC Markets would be a better choice here
  • There is no ECN account with raw spreads
Visit AvaTrade

#2 - Pepperstone

Why We Chose Pepperstone

Established in Australia in 2010, Pepperstone is a top-rated forex and CFD broker with over 400,000 clients worldwide. It offers access to 1,300+ instruments on leading platforms MT4, MT5, cTrader and TradingView, maintaining low, transparent fees. Pepperstone is also regulated by trusted authorities like the FCA, ASIC, and CySEC, ensuring a secure environment for day traders at all levels.

"Pepperstone stands out as a top choice for day trading, offering razor-sharp spreads, ultra-fast execution, and advanced charting platforms for experienced traders. New traders are also welcomed with no minimum deposit, extensive educational resources, and exceptional 24/7 support."

- DayTrading Review Team
  • Instruments: CFDs, Forex, Currency Indices, Stocks, Indices, Commodities, ETFs, Crypto, Spread Betting
  • Regulator: FCA, ASIC, CySEC, DFSA, CMA, BaFin, SCB
  • Platforms: MT4, MT5, cTrader, TradingView, AutoChartist, DupliTrade
  • Minimum Deposit: $0
  • Minimum Trade: 0.01 Lots
  • Leverage: 1:30 (Retail), 1:500 (Pro)

Currency Indices

Pepperstone offers trading on these 3 currency indices:

  • USD
  • EUR
  • JPY

Pros

  • Now offering spread betting through TradingView, Pepperstone provides a seamless, tax-efficient trading experience with advanced analysis tools.
  • There’s support for a range of industry-leading charting platforms including MT4, MT5, TradingView, and cTrader, catering to various short-term trading styles, including algo trading.
  • Pepperstone boasts impressive execution speeds, averaging around 30ms, facilitating fast order processing and execution that’s ideal for day trading.

Cons

  • Despite enhancements to its range of markets, crypto offerings are relatively limited compared to other brokers such as eToro, with no option to invest in real coins.
  • Pepperstone does not support cTrader Copy, a popular copy trading feature built into the excellent cTrader platform and available at alternatives like IC Markets.
  • There’s no simplified proprietary trading platform, nor are there any social trading features, which could be a disadvantage if you are new to day trading.
Visit Pepperstone

#3 - XM

Why We Chose XM

XM is a globally recognized forex and CFD broker with 10+ million clients in 190+ countries. Since 2009, this trusted broker has been known for its low fees on 1000+ instruments. XM is regulated by multiple financial bodies, including the ASIC and CySEC.

"XM is one of the best forex and CFD brokers we have tested. The flexible account types will suit a variety of short-term trading styles while the $5 minimum deposit and smooth sign-up process make it easy to start trading."

- DayTrading Review Team
  • Instruments: Forex, Stock CFDs, Turbo Stocks, Indices, Commodities, Precious Metals, Energies, Shares, Crypto, Futures
  • Regulator: ASIC, CySEC, DFSA, FSC, FSCA
  • Platforms: MT4, MT5
  • Minimum Deposit: $5
  • Minimum Trade: 0.01 Lots

Currency Indices

XM only allows for trading on the USD currency index.

Pros

  • 1000+ instruments are available, including recently added thematic indices, providing exposure to emerging industries
  • The broker offers premium research including market sentiment, fundamental insights and strategy builders
  • XM continues to deliver diverse and multilingual educational materials and offers a useful live education schedule for its webinars and insights

Cons

  • PayPal deposits are not supported
  • There is weak regulatory oversight through the global entity
  • There's $5 inactivity fee after only 3 months, though this won't affect active traders
Visit XM

#4 - Eightcap

Why We Chose Eightcap

"Eightcap delivers in every area for day traders with a growing selection of charting platforms and AI-powered tools. Now sporting 250+ crypto CFDs and the Crypto Crusher market scanner, it's also become a stand-out choice for crypto trading, winning our 'Best Crypto Broker' award two years in a row."

- DayTrading Review Team
  • Instruments: CFDs, Forex, Stocks, Indices, Commodities
  • Regulator: ASIC, FCA, xCySEC, SCB
  • Platforms: MT4, MT5, TradingView
  • Minimum Deposit: $100
  • Minimum Trade: 0.01 Lots

Currency Indices

Eightcap only allows for trading on the USD currency index.

Pros

  • Eightcap stands out with a selection of powerful trading tools, including MT4 and MT5, the innovative algorithmic trading platform Capitalise.ai, and more recently the 50-million strong social trading network TradingView.
  • After bolstering its roster in 2021, Eightcap offers one of the most extensive selections of cryptocurrency CFDs in the market, with crypto/fiat pairs, crypto/crypto pairs, plus crypto indices for broader exposure to the market.
  • With tight spreads from 0 pips, low commission fees, and high leverage up to 1:500 for certain clients, Eightcap provides cost-effective and flexible trading conditions that can accommodate an array of strategies, including day trading and scalping.

Cons

  • Despite a useful library of educational guides and e-books, Eightcap still trails IG’s comprehensive toolkit for aspiring traders with its dedicated IG Academy app and 18 course categories.
  • The demo account expires after 30 days and can only be extended upon request - a notable inconvenience compared to the likes of XM with its unlimited demo mode.
  • Eightcap needs to continue bolstering its suite of instruments to match category leaders like Blackbull Markets with its 26,000+ assets, featuring a particularly weak selection of commodities.
Visit Eightcap

#5 - CityIndex

Why We Chose CityIndex

City Index is an established and award-winning forex, CFD and spread betting broker with top-tier global regulation, including in the UK (FCA) and Australia (ASIC). With 30+ years in the industry, 13,500+ instruments and 24/5 customer support, City Index is a solid pick for aspiring traders.

"City Index is best for new and intermediate traders looking for a wide selection of assets on user-friendly platforms."

- DayTrading Review Team
  • Instruments: CFDs, Forex, Stocks, Cryptos, Options, Commodities, Bonds
  • Regulator: ASIC, FCA, MAS
  • Platforms: MT4, TradingView, TradingCentral
  • Minimum Deposit: $0
  • Minimum Trade: 0.01 Lots
  • Leverage: 1:30 (Retail), 1:50 (Accredited Investor), 1:200 (Sophisticated Investor), 1:300 (Wholesale Investor), 1:400 (Professional Trader). Varies with jurisdiction.

Currency Indices

CityIndex only allows for trading on the USD currency index.

Pros

  • Thousands of instruments including thematic indices and interest rates that are not available at many alternatives
  • A free demo account with unrestricted access to all markets and trading tools
  • No minimum deposit to get started

Cons

  • No Islamic account for Muslim traders
  • $15 monthly inactivity fee
  • US traders not accepted
Visit CityIndex

#6 - DNA Markets

Why We Chose DNA Markets

DNA Markets is a forex and CFD broker established in 2020. The broker operates two entities in Australia and the offshore jurisdiction, St Vincent and the Grenadines. Traders can access 250+ markets, with a Standard account for beginners and a Raw account for experienced traders. The reliable MetaTrader 4 and MetaTrader 5 platforms are available, alongside Signal Start.

"DNA Markets is an excellent choice for short-term traders familiar with the MetaTrader platforms. The smooth sign-up process also makes it easy to get started while the $100 minimum deposit is accessible. That said, DNA Markets trails the top brokers in education, research and mobile trading. "

- DayTrading Review Team
  • Instruments: CFDs, Forex, Indices, Commodities, Stocks, Crypto
  • Regulator: ASIC
  • Platforms: MT4, MT5
  • Minimum Deposit: $100
  • Minimum Trade: 0.01 Lots

Currency Indices

DNA Markets only allows for trading on the USD currency index.

Pros

  • Low trading fees with spreads from 0.0 pips in the Raw account and zero non-trading fees
  • 24/5 customer support with response times of <2 minutes during testing
  • Short-term trading strategies are permitted including scalping and automated trading using Expert Advisors (EAs)

Cons

  • The investment offering trails alternatives, especially in terms of stocks, cryptos and commodities
  • Despite access to MT4 and MT5, there is no proprietary trading app
  • Although it continues to strengthen its client base and reputation DNA Markets lacks the track record of top brokers like Vantage
Visit DNA Markets

#7 - eToro

Why We Chose eToro

eToro is a top-rated multi-asset platform which offers trading services in thousands of CFDs, stocks and cryptoassets. Launched in 2007, the brand has millions of active traders globally and is authorized by tier one regulators, including the FCA and CySEC. The brand is particularly popular for its comprehensive social trading platform. Cryptoasset investing is highly volatile and unregulated in the UK and some EU countries. No consumer protection. Tax on profits may apply. 76% of retail accounts lose money.

"eToro's social trading platform leads the pack with a terrific user experience and active community chat that can help beginners find opportunities. There are also competitive fees on thousands of CFDs and real stocks, plus excellent rewards for experienced strategy providers."

- DayTrading Review Team
  • Instruments: CFDs, Forex, Stocks, ETFs, Cryptos, Futures, Commodities, Bonds
  • Regulator: FCA, ASIC, CySEC, FSA, FSRA, MFSA
  • Platforms: eToro Web, CopyTrader, TradingCentral
  • Minimum Deposit: $50
  • Minimum Trade: $10

Currency Indices

eToro only allows for trading on the USD currency index.

Pros

  • There's a comprehensive online training academy with accessible resources, from bitesize articles to comprehensive courses
  • Exciting investment portfolios are available covering traditional market trends as well as tech, crypto and more
  • eToro has bolstered its investment offering, most recently with new crypto assets, now offering over 90 digital currencies

Cons

  • The lack of additional charting platforms like MT4 will reduce the appeal for seasoned day traders accustomed to using third-party software
  • There are no guaranteed stop loss orders which would be a useful risk management feature for beginners
  • There are limited contact methods aside from the in-platform live chat
Visit eToro

#8 - InstaForex

Why We Chose InstaForex

InstaForex is a forex and CFD broker founded in 2007. The broker offers diverse market coverage to over 7 million clients, spanning traditional assets like currencies and shares, as well as other interesting opportunities such as IPOs. Traders can also access copy trading services, PAMM accounts and investment opportunities. InstaForex is regulated by the BVI FSC.

"InstaForex maintains its position as a top forex broker, with more currency products than most rivals. The tight spreads and low minimum deposits make it accessible to all experience levels, especially those familiar with the MT4 and MT5 platforms."

- DayTrading Review Team
  • Instruments: CFDs, Forex, Stocks, ETFs, Cryptos, Futures, Commodities
  • Platforms: MT4, MT5

Currency Indices

InstaForex only allows for trading on the USD currency index.

Pros

  • The broker is a particularly good pick for serious forex traders, with over 100 currency pairs, tight spreads from 0.0 pips and a market-leading selection of curated forex market resources
  • The broker is accessible for beginners, with low minimum deposits, Cent accounts (for global clients) and zero-commission trading available
  • There’s a copy trading service available with just a $10 minimum deposit, allowing clients to become both followers and providers

Cons

  • The broker’s website and client cabinet feel outdated and difficult to navigate for newcomers
  • Market coverage and account conditions vary significantly between the global and EU entities - for example, only 300+ instruments are available for global clients, whilst European traders can access 2500+
  • The broker’s global branch offers weaker regulation via the offshore jurisdiction of the British Virgin Islands, which means non-EU traders will receive limited safeguards
Visit InstaForex

#9 - IG

Why We Chose IG

Founded in 1974, IG is part of IG Group Holdings Plc, a publicly traded (LSE: IGG) brokerage. The brand offers spread betting, CFD and forex trading across an almost unrivalled selection of 17,000+ markets, with a range of user-friendly platforms and investing apps. For 50 years, IG has maintained its position as an industry leader, excelling in all key areas for traders.

"IG continues to provide a comprehensive package with an intuitive web platform and best-in-class education for beginners, plus advanced charting tools, real-time data, and fast execution speeds for experienced day traders."

- DayTrading Review Team
  • Instruments: CFDs, Forex, Stocks, Indices, Commodities, ETFs, Futures, Options, Crypto, Spread Betting
  • Regulator: FCA, ASIC, NFA, CFTC, DFSA, BaFin, MAS, FSCA
  • Platforms: Web, ProRealTime, L2 Dealer, MT4, AutoChartist, TradingCentral
  • Minimum Deposit: $0
  • Minimum Trade: 0.01 Lots
  • Leverage: 1:30 (Retail), 1:250 (Pro)

Currency Indices

IG only allows for trading on the USD currency index.

Pros

  • The proprietary web-based platform continues to caters to traders of all levels, with advanced charting tools and real-time market data useful for day trading
  • The ProRealTime advanced charting platform is free as long as certain modest monthly trading activity requirements are met
  • The IG app offers a superb mobile trading experience with a clean design that helped it secure Runner Up at our Best Trading App award

Cons

  • Stock and CFD spreads still trail the cheapest brokers like CMC Markets based on tests
  • Beginners might find IG’s fee structure complex, with various fees for different types of trades or services, potentially leading to confusion or unexpected charges
  • IG has discontinued its swap-free account, reducing its appeal to Islamic traders
Visit IG

#10 - Vantage

Why We Chose Vantage

Founded in 2009, Vantage offers trading on 1000+ short-term CFD products to over 900,000 clients. You can trade Forex CFDs from 0.0 pips on the RAW account through TradingView, MT4 or MT5. Vantage is ASIC-regulated and client funds are segregated. Copy traders will also appreciate the range of social trading tools.

"Vantage remains an excellent option for CFD traders seeking a tightly-regulated broker with access to the reliable MetaTrader platforms. The fast sign-up process and $50 minimum deposit make it very straightforward to start day trading quickly."

- DayTrading Review Team
  • Instruments: CFDs, Forex, Stocks, Indices, Commodities, ETFs, Bonds
  • Regulator: FCA, ASIC, FSCA, VFSC
  • Platforms: ProTrader, MT4, MT5, TradingView, DupliTrade
  • Minimum Deposit: $50
  • Minimum Trade: 0.01 Lots
  • Leverage: 1:500

Currency Indices

Vantage only allows for trading on the USD currency index.

Pros

  • The broker has recently made efforts to expand its suite of CFDs providing further trading opportunities
  • There are no short-term strategy restrictions with hedging and scalping permitted
  • The low minimum deposit of $50 and zero funding fees make this broker a great choice for new traders

Cons

  • The average execution speeds of 100ms to 250ms are slower than alternatives based on tests
  • It's a shame that some clients will need to register with the offshore entity, which offers less regulatory protection
  • Unfortunately, cryptos are only available for Australian clients
Visit Vantage

What Are Indices In Forex Trading?

In finance, an “index” is a collection of assets bundled together to represent a particular market sector. A forex index aims to track the value of a single currency in relation to a number of other significant currencies, all bundled up into one single figure.

The forex indices achieve this by tracking a basket of individual currency pairs, which are weighted to provide a theoretically balanced value for the main currency. This reduces exposure to a single currency pair and aims to provide a trading vehicle based on a single currency.

For example, the US Dollar Index is calculated by combining a basket of currencies from major global nations, including the UK, Canada and Switzerland. The weighting of the individual currency pairs is:

Major forex indices include the aforementioned US Dollar Index, the Euro Currency Index and the Swiss Franc Index. However, there are also forex currency indices available for minor and exotic currencies, such as the Swedish Krona Index and Norwegian Krone Index.

Forex Index Trading vs Forex Pair Trading

The main difference between trading forex pairs and indices is diversification. When trading forex pairs, investors are speculating on the price relationship between two currencies. This relationship is often more volatile than a forex index and the major assets such as USD/EUR are more liquid. On the other hand, forex index trading provides a more balanced value of a single currency.

Another difference is available assets. While there are hundreds of currency pairs, there are far fewer forex indices. Trading forex pairs vs indices, therefore, is a good way to speculate on minor or exotic currencies.

Markets & Instruments

When it comes to forex index trading, as outlined above, there are not as many markets to choose from as traditional indices or currency pairs. While non-major currencies such as the Swedish krona and Singapore dollar are available to trade, investors are limited to tens, rather than hundreds of markets.

However, there is no shortage of available trading instruments for forex indices. For example, the US Dollar Index can be traded through forex-style CFDs, futures, options, and spread betting.

Trading Fees

Fees are a key consideration for investors, as high charges and commissions can quickly eat into profits.

Investors will be pleased to know that for forex index trading, generally fees are competitive. In fact, for US Dollar Index trading and other major FX indices, many leading forex day trading platforms offer zero commission or low-spread CFD trading.

Forex Index Trading Specifications - CMC Markets
Forex Index Trading Specifications – CMC Markets

When looking to trade major forex indices through more traditional methods such as mutual funds or ETFs, costs are also low. This is because these instruments are passive tracker funds rather than actively managed funds that command higher commissions.

Pros Of Forex Index Trading

Cons Of Forex Index Trading

Forex Index Trading Strategies

There are different strategies for live forex index training. Ultimately, experienced traders will draw upon a combination of leading forex indicators and signals to predict trades.

Rumours & News

Seasoned forex investors will know the power of breaking news on the value of a currency. Traders can capitalize on this trading opportunity using forex indices, which filter out the effects of other currencies through their diversification.

One popular strategy is to “buy the rumour and sell the news”. This hinges on getting your position locked in before the market reacts to the upcoming news to maximize profits. However, this is a risky strategy as rumours can often be incorrect. Additionally, there is no guarantee that news will affect markets in the way that investors predict.

Breaking news to look out for includes inflation and interest rate announcements as well as high-profile currency interventions, such as in late 2022 when the Bank of England stepped in to purchase long-dated gilt bonds.

This was to contain the mass sell-off that occurred after the government’s short-lived mini-budget, which affected the 30-year gilt yield by as much as 1% as well as the value of the pound against the dollar.

Fundamentals

Long-term investments in a forex index will often be driven by fundamental analysis. These are the economic and political factors that influence the value of a currency.

Examples of fundamentals include economic growth, as tracked by GDP and employment rates. Political stability is also a crucial fundamental, with markets notoriously sensitive to political changes. The balance of trade is also important, with high exports generally strengthening a currency.

Investors will often look at historical data to find trends in a currency’s fundamentals to make predictions as to its future value. However, if an investor believes that an upcoming event will change the pattern of fundamentals, a reversal trade is always a lucrative form of investing, especially when using options.

Technical Analysis

Thanks to the wide availability of retail analysis and platforms such as TradingView and MetaTrader 4, powerful technical analysis is more accessible to investors than ever.

Users may want to look at trend lines such as the relative strength index (RSI) in forex index trading or other leading indicators such as support and resistance lines and Fibonacci overlays.

Technical analysis can be done through various time frames, with short-term forex trading instruments such as binary options and CFDs able to analyse patterns on 1-minute or 5-minute charts.

Trading forex indices on CMC Markets
CMC Markets – Forex Index Trading Platform

How To Trade Forex Indices

Decide On Your Market & Instrument

While many brokers offer several currency indices, it is a good idea to decide on your favoured trading assets first. This is to ensure your chosen broker supports these assets before signing up and depositing funds.

It is also important to decide on your preferred trading vehicles, as most brokers support just one or two, for example, CFDs, ETFs, binary options or futures.

Choose A Broker

When it comes to trading forex indices, choosing a reputable and low-cost broker is key. Here are our top tips for finding the best forex index broker:

Create An Account

Now, create an account. This is usually a simple process, but firms often require verification details for regulatory purposes, such as IDs, passports or bank statements.

Next up is to fund your forex index trading account. If you plan to trade a leveraged forex index market, ensure that you have sufficient capital to avoid a quick stop-out or margin call.

Find Your Market

Once your account is set up and funded, it is time to start trading forex indices. Download one of your broker’s supported trading platforms (some brokerages offer web-based platforms too) and navigate to your chosen product.

If your trading will centre around a small number of markets, most platforms allow traders to bookmark or favourite these asset pages for quick navigation in the future.

Make A Trade

Once you have conducted analysis of your forex index, it is time to make the trade.

As well as selecting your position, set stop-loss and take-profit levels, with advanced “trailing” tools available on some platforms. This will help keep a handle on your risk exposure.

Close Your Position

Monitor the market for the best opportunity to close your trade, taking your profit or closing out your losses.

With that said, some instruments like binary options may not offer an early cash-out opportunity. In these instances, hedging a trade to either lock in a profit or minimize losses may be possible.

Final Word On Trading Forex Indices

Forex index trading is a good choice for investors that wish to speculate on the value of a currency with less exposure to individual currency pairs. There are plenty of available forex index trading instruments, and these markets are largely low-cost. However, there is limited choice for exotic markets and trading hours are reduced compared to traditional currency pairs.

Use our list of the top forex index brokers to start trading.

FAQs

What Is An Index In Forex Trading?

A forex index is a basket of currency pairs with a common currency, such as the US Dollar. This provides a diversified measure of the value of this common currency.

Forex index trading essentially offers a means to speculate on the value of a single currency, such as the USD, EUR or GBP.

What Are The Best Currency Indices To Trade?

Forex indices such as the US Dollar Index, British Pound Index and Euro Index are highly liquid. However, a solid strategy can make any forex index a profitable trading market.

Head to our tutorial on forex index trading to find a suitable broker and get started.

What Is The Best Time To Trade Forex Indices?

The best forex index trading opportunities will occur around significant news, such as interest rate announcements, changes in government monetary policy and new global trade relationships.

Note that unlike trading standard forex pairs, FX indices may not be available 24/5.

Is Trading Forex Indices Better Than Forex Pairs?

Forex index trading allows investors to speculate on a single currency more reliably and stably than by using a single currency pair. However, currency pair trading can be more lucrative due to its comparative volatility, and investors have more options when it comes to available currencies.