A trader goes long US500 on Thursday afternoon, holds it over the weekend, and comes back to find the position down more than the chart seems to justify. Two things happened that had nothing to do with direction: three nights of financing were debited, and a batch of large constituents went ex-dividend. Neither appears as a candle.
Index CFDs are popular because they give exposure to a whole equity market in one ticket, with no stock selection and no exchange membership. The mechanics underneath are more particular than a currency pair, and the details are where accounts leak.
What you are actually trading
You are not buying shares. An index CFD is a contract with your broker whose value tracks an index level, and the broker hedges its own book somewhere else, usually in the futures market. Two versions exist on most platforms and they behave differently.
A cash index CFD tracks the spot index level and has no expiry. Because you are holding a leveraged position in something with no natural carry, the broker charges overnight financing, and when constituent companies go ex-dividend the index level drops mechanically, so the broker applies a dividend adjustment: a credit on long positions and a debit on shorts. That adjustment is not profit, it offsets the drop.
A futures based CFD tracks a specific futures contract. It has an expiry date and a roll, no separate financing line, and a price that differs from the cash level because the cost of carry is already inside it. Traders who ignore the expiry on these find their position closed or rolled at a level they did not choose. The financing side has the same logic as swap rates on currency pairs, just with equity carry rather than an interest rate differential.
The three indices most people trade
| Index | What it holds | Main cash session |
|---|---|---|
| S&P 500 | 500 large US companies, weighted by market value | 09:30 to 16:00 New York |
| NASDAQ 100 | 100 large non-financial Nasdaq listings, technology heavy | 09:30 to 16:00 New York |
| DAX 40 | 40 German companies, calculated as a performance index | 09:00 to 17:30 Frankfurt |
The character differences matter more than the country. The NASDAQ 100 is concentrated in a small number of very large technology names, so its daily range is typically wider than the S&P 500's and a single earnings report can move the whole index. Traders who size a NASDAQ position the way they size an S&P position are taking noticeably more risk, which is covered in more depth in the NAS100 guide.
The DAX has a quirk worth knowing: it is a performance index, so dividends are reinvested into the calculation rather than dropping out of it. That removes the dividend adjustment that a price index CFD carries, and it is one reason DAX and US index charts diverge over long horizons.
Hours, and the hours in between
Brokers quote index CFDs far beyond the cash session, using futures pricing to fill the gap. What that means in practice is that the instrument is tradeable at 03:00 with a much wider spread and far less depth, and that the real volume arrives at the cash open.
The cash open itself is the most violent part of the day. Orders accumulated overnight execute in the first minutes, the spread is wide, and a market order can fill several points from the last quote. Many traders simply do not participate in the first fifteen minutes, which is a defensible rule rather than a lack of nerve.
Index positions carry gap risk that currency pairs mostly do not. The underlying market closes overnight and at weekends, so a stop sitting between Friday's close and Monday's open is filled at the reopening price, not at your level. Leveraged index trading carries a high risk of loss.
Contract size and what a point costs
There is no universal standard here, and this is where beginners lose money for no reason. Some brokers set one lot of an index CFD at one unit of the index per point, some at ten, some quote in the index currency and some convert to your account currency. Two brokers can show identical charts and price the same move differently by a factor of ten.
Read the instrument specification, work out the value of a one point move on 1.00 lot, then size from your stop distance in points. If the numbers do not match what you expected, place the smallest possible position and check the profit and loss after a few points of movement before scaling up. That five minute test has saved more accounts than any indicator.
What actually moves them
Interest rate expectations set the tone. Equities are valued off future earnings discounted at a rate, so central bank communication moves indices hard, and the reaction to an FOMC decision often reverses inside the first hour as the statement and the press conference say different things. Around that sit earnings season, where four or five very large companies can decide the index's week, and macro data on inflation and employment.
Correlation is the trap. Long the S&P 500, long the NASDAQ 100 and long the DAX is one position in three tickets, not a diversified book. Risk limits should be set on the combined exposure, and the weekend behaviour of all three is worth understanding through how weekend gaps work before you carry any of them through a Friday close.
"Indices punish people who think they are diversified. Three index positions in the same direction is one trade with three commission bills."
— Alex Onta, Executive Director, SINGUARD
Key Takeaways
- Cash index CFDs charge overnight financing and apply dividend adjustments; futures based CFDs carry an expiry and a roll instead.
- The DAX is a performance index that reinvests dividends, so it does not behave like the price indices on ex-dividend dates.
- Contract size per point varies between brokers, so check the specification and test with a minimum position before scaling.
- Overnight and weekend gaps are the structural risk, and holding several correlated indices is one position rather than three.
Frequently Asked Questions
What is the difference between a cash index CFD and a futures index CFD?
A cash CFD tracks the spot index level, has no expiry, charges overnight financing and applies a dividend adjustment when constituent shares go ex-dividend. A futures CFD tracks a specific futures contract, has an expiry date and no separate financing line, because the cost of carry is already priced into the futures level. Brokers usually offer both.
Why does the DAX behave differently from the S&P 500 on dividends?
The DAX is a performance index, meaning dividends paid by its constituents are reinvested into the index calculation. The S&P 500 headline number is a price index, so dividends are not included and the index level drops when large constituents go ex-dividend. Cash CFDs on price indices therefore carry a dividend adjustment that a DAX position does not.
Can I hold an index CFD over the weekend?
You can, and it is the main structural risk in index trading. The underlying market closes on Friday and reopens Monday after two days of news, so the first traded price can be well away from Friday's close and a stop between the two levels is filled at the new price. Reduce size or close before the weekend if that exposure is not part of the plan.