> Markets > Trading the ASX 200 Index

Trading the ASX 200 Index

Trading the ASX 200 Index
Written by Andy

The Aussie 200 Index CFD is good for practising and developing your day trading skills, as owning one contract is equal to one dollar per point. Once you have a good understanding and feel for where the market is expected to move in a session, and have your keyboard skills perfected, you’ll be on your way.

CMC Markets’ Aussie 200 Index CFD is based on the Sydney Futures Exchange (SFE) Share Price Index futures contract, known as the SPI. In turn, the SPI is based on the S&P ASX 200 – also known as the Cash Market.

Well, what drives the Aussie economy?

Well, what drives the Aussie economy? Higher commodity prices will add to our exports. Exporters…coal companies, iron juniors, grains marketers and other stocks related to the agricultural industry will make more money from the same amount of work. The world is crying out for food. Will this demand have an input on our fertilizer and agriculture stocks? I think so.

The middle class in Asia is tending towards western food, therefore the rising demand for food – from China and India in particular – has rapidly increased the global call for these products. This has led to demand outstripping supply, steep price rises and delays in sourcing additional tonnage.Not only will these conditions tend to increase the cost of farm products, it will certainly increase the cost of farm input, e.g. fertiliser, machinery, and so on.So let us first of all have a look at some relevant Australian companies which are actually producing food.

Trading an Index CFD

Using CFDs to trade an index is just as simple as using CFDs to trade an equity. Let’s consider the AUS200.

If the CFD provider’s AUS200 quote is, say, 4402/4403, then you have the option to buy the index at 4403 from the offer, or the option to sell the index at 4402 to the bid.

Let’s say you buy one CFD at 4403 as you expect the index to rise. This time things don’t go as expected, and the index falls to 4383/4384.

You decide to close your trade by selling one CFD at the bid price, 4383.

In this case, your loss is calculated as follows:


One CFD is equal to A$1 per AUS200 point, translating to a loss of A$20.

Remember: with CFDs, you realise your profit or loss in the same underlying currency that the index is traded in. For instance, if you were buying and selling CFDs on a U.S. index such as the US 30 (Dow Jones Industrial Average), then your profit or loss would be in U.S. dollars.

Many commodities, such as gold, are also traded in U.S. dollars. This also means that your profit or loss is calculated in U.S. dollar terms. Your profit or loss, however, is automatically settled in your account’s base currency, at no cost.

While the Aussie 200 CFD is a very popular trading instrument in its own right, it can also offer you the ability to change the overall weighting of your total portfolio very swiftly.

Imagine you believed there was going to be a short term fall in the market. You would be able to go a long way to defending the value of a well diversified portfolio by taking on short exposure through the use of this index CFD. Depending on the timeframe of your investment, you may choose to hedge a small part of your portfolio (or something a bit larger), but it could be a valuable addition even if it just allows you to take some of the sting out of market falls.

About the author


Leave a Comment

Trade with Pepperstone! Pepperstone are a UK regulated MT4, MT5 & cTrader provider offering tight spreads and many markets to trade. Trade responsibly: 79.8% of people lose money when trading CFDs with this broker. Click Here!