The FTSE 100 stock index and its trading features
The FTSE 100 stock index, also known as the "Footsie", is one of the most recognised and widely used financial indicators in the world.
The index was created in 1984 by the London Stock Exchange and the Financial Times as a barometer of the British economy.
It is a market capitalisation-weighted index of the 100 largest public companies listed on the London Stock Exchange.
Since its inception, the FTSE 100 has become a significant and influential indicator that reflects the state of not only the British but also the global economy.
This makes the asset an excellent tool for international investors looking to diversify their portfolios.
Trading the FTSE 100 has a number of specific features that must be taken into account for successful market performance. Here are some of them:
- Volatility: The FTSE 100 can fluctuate significantly based on economic news and data.
- Trading Hours: The London Stock Exchange is open from 8:00 AM to 4:30 PM GMT, and this is when prices move most actively.
- Diversification: The index includes companies from different industries, allowing investors to spread their risks.
The price of Footsie is most influenced by factors such as the state of the global and UK economies, commodity prices and the financial health of individual companies that make up the FTSE 100 index.
Overall, the FTSE 100 index is a powerful tool for investors to track the performance of the UK's largest companies and use this information to make informed investment decisions.
The Basics of FTSE 100 Trading
Trading the FTSE 100 index is suitable for those who want to try their hand at the London Stock Exchange.
The basic principles and mechanisms of trading the FTSE index involve buying and selling futures or options on the index, as well as investing in index funds that track its performance.
Another advantage of this instrument is that the London Stock Exchange's working hours practically coincide with those of most European countries, which is convenient if you live in Europe.
The basic mechanics of trading on the FTSE are no different from other exchange-traded assets: some trade on the rise, while others bet on the decline.
To successfully trade the FTSE, it's important to consider a number of factors that influence the index's movements. These include economic news and events in the UK, such as unemployment, inflation, and interest rate , commodity prices, and company earnings reports.
An interesting feature is that FTSE 100 prices are more influenced by not only domestic events, but also global news.
This is not surprising, as 60% of the companies in the index generate revenue outside the UK, as they operate internationally. For this reason, the FTSE 100 is sometimes referred to as a global index with a UK weight.
An interesting feature is that, due to its structure, the FTSE 100 index has a strong bias toward oil and mining stocks. Collectively, this segment accounts for approximately 30% of the index's value.
Therefore, changes in global commodity prices influence the price of this asset much more than some data from the UK.
Understanding these factors and being able to analyse their impact on the FTSE index is key to successful trading.
FTSE trading strategies vary and depend on the individual trader's preferences. Practically all available exchange strategies , from long-term strategies such as " Buy and Hold " to scalping on M5 and M15 timeframes.
Currently, most experts, including technical indicators, are quite skeptical about the FTSE 100's price outlook. Due to the global crisis, most British company shares are declining in value, which is ultimately causing a decline in the FTSE 100 index.
