Why are indices the best choice for a trader?

There are dozens of trading instruments on the financial market: currencies, gold, oil, wheat, stocks, cryptocurrencies, and, of course, indices. And here is the paradox: most beginners rush first to currencies or precious metals, while professionals focus on indices. Why does this happen? Let’s look deeper.

1. Speculation vs. Physical Delivery
Let’s start with an important distinction between indices and commodities like oil or gold. Most commodity futures (which are how they are traded on the exchange) have physical delivery. In theory (and sometimes in practice), you can get a barrel of oil, a bag of wheat, or a bar of gold if you hold the futures until expiration.

Sounds interesting, but for a speculator, it’s a minus. Why?

Because these markets include traders as well as participants with a physical interest – producers, suppliers, and industrial companies – they don’t analyze charts, indicators, volumes, or Fibonacci levels. They buy or sell because they need to obtain a commodity or fix a price for the future. This distorts price behavior and makes analysis more difficult.
Let’s look at a live example. Imagine a situation: an international transaction between companies.

An American company purchases a batch of cars from Toyota Corporation of Japan – say, 40 new Land Cruisers for use in the corporate fleet. The cars have already been loaded into containers and shipped from the Yokohama port to Los Angeles. But before the US side can pay for the delivery, it needs to transfer the money in Japanese yen, since settlements with Toyota are made in local currency.

What happens next? An American company enters the foreign exchange market (or the currency futures market) to buy yen. And it does so not for the sake of speculation but for the purely operational purpose of paying for the commodity.

Why is this important for a trader?

When there is a large purchase in the USD/JPY market or the J6 futures (Japanese yen futures), you, as a trader, can see a sharp spike in volume. But this does not signify a trend reversal or increased speculator interest.

It’s just a corporate transaction that has nothing to do with price forecasting. The volumes it causes can mislead those who trade based on technical analysis or volume levels.

For this reason, analyzing currencies or commodity futures is more difficult – at any moment, a participant may enter the market who simply needs to “buy currency,” “hedge the oil delivery price,” or “fix the corn purchase rate.” Their actions do not reflect the market consensus that speculators count on.
This is a classic example of a so-called “commercial hedge” or “currency cover.” Thousands of such transactions occur in the market every day, involving everything from clothing manufacturers to airlines.

Indices are a different approach

However, index futures (like the E-mini S&P 500 or Nasdaq) have no physical delivery. No one is going to deliver a portfolio of 500 stocks to you. These instruments are purely settlement-based and traded almost exclusively by speculators. That means a cleaner market where the price is shaped by the supply and demand of profit-oriented participants, not delivery. In other words, every volume and every price movement is the result of a struggle of traders’ opinions, and it can be analyzed, forecasted, and traded.

2. Volumes

Another problem with physical delivery markets is volume analysis. If you see a volume spike in gold futures, you can’t be sure whether traders are speculating on a rise/fall or whether it is a jewelry company hedging the purchase of raw materials for 6 months ahead.
In index futures, the situation is simpler: volumes only tell about traders’ interest. If there are purchases, someone believes in the market growth. This makes technical and volumetric analysis much more accurate and efficient.

Example

You can often see a key-level breakout without volume confirmation on an oil СL chart (WTI or US Oil on Forex). Some oil traders have bought 1000 contracts to lock in a price for delivery in 6 months. It has nothing to do with the current market movement, but the technical level is broken.

On ES or NQ (US500 or US100 on Forex), a level breakout is almost always accompanied by volume growth. If it’s a false breakout, you can see it by the quick change in the dominant side (volume to buy – and a sharp pullback). This allows using price action and volume analysis strategies (e.g., VWAP, clusters, delta) with high accuracy.

3. Relationship to Other Markets

Many people trade the S&P 500 through CFDs or on Forex platforms. However, few people think about where the price of these instruments comes from. The main source is index futures, such as ES (E-mini S&P 500). It is traded on the CME and forms the price on which all derivatives, from CFDs to ETFs, are oriented.

The S&P 500 is the “shadow” of the ES. Therefore, professional traders analyze future quotes, volumes and open interest in detail – that’s where the real market lives. CFD and Forex versions just follow it with minimal lag. The same goes for other indices: Dow Jones (YM), Nasdaq (NQ), and DAX (FDAX). Each has an exchange-traded futures contract that sets the tone.

4. Liquidity and Availability

Index futures are some of the most liquid instruments on the planet. The E-mini S&P 500 alone trades millions of contracts per day. This means instant order execution, minimal spreads, and no slippage – critical for intraday trading.

5. Volatility and Logical Movement

Indices are aggregated. They are not dependent on a single asset or geopolitical factor. The S&P 500 is the 500 largest company in the US from a variety of sectors. It reacts to the economy as a whole, corporate reporting, Fed policy, and investor sentiment, not whether an oil pipeline exploded or whether the corn crop grew. This makes index movements cleaner and more logical. Trends hold longer, support/resistance levels work more clearly, and technical analysis is more reliable.

6. News Factor

Let’s imagine that an important news item comes out – a Fed rate hike. Gold starts rushing: first up (as protection against risk), then sharply down (as an asset without yield), then up again – this is the reaction of different participants: investment funds, jewelry companies, and central banks.

• GC (Gold Futures) – the chart looks twitchy, levels are broken “blindly,” and volumes are growing, but the direction is lost. Why? Because the volume comes from speculators and hedgers who need the metal itself.
• ES (S&P 500 Futures) – reacts logically: the rate increases, stocks go down. Volumes confirm the move. We see a beautiful trend. Levels are being worked out. Most participants are traders, funds, and market makers playing on price movement, not physical delivery.

Comparison: key parameters

Summary for a Trader

You can trade anything: currencies, gold, oil, stocks. But if your goal is to earn steadily, with minimum noise and maximum logic, then indices are your choice. Real chart analysis confirms that index futures such as the S&P 500 provide a cleaner and more predictable market for speculative trading compared to commodity futures such as gold. The lack of physical delivery and the prevalence of speculators make indices more suitable for technical analysis and short-term strategies. Therefore, if you’re looking for a tool with:

• The pure logic of movement,
• Technical predictability,
• Understandable volume,
• High liquidity and stable volatility,

Then, index futures are your primary asset. Whether you want intraday, scalping, or swing, it works better here than anywhere else. And that’s why most pros end up switching to:

• ES (US500 or S&P 500 on Forex)
• NQ (US100 or US Tech on Forex)
• YM (US30 or Dow Jones on Forex)
• FDAX (DE40 or DAX on Forex).