FTSE 100 stock index and features of trading using it
The FTSE 100 stock index, also known as the "Footsie", is one of the most recognized and widely used financial indicators in the world.
The index was created in 1984 by the joint efforts of the London Stock Exchange and the Financial Times as a barometer for the British economy.
It is a market capitalization weighted index of the 100 largest public companies traded on the London Stock Exchange.
Since its inception, the FTSE 100 has become a significant and influential indicator that reflects the health of not only the UK, but also the global economy.
This makes the asset an excellent tool for international investors seeking to diversify their portfolios.
Trading using the FTSE 100 has a number of features that must be taken into account to be successful in the market. Here are some of them:
- Volatility: The FTSE 100 can fluctuate significantly depending on economic news and data.
- Trading hours: The London Stock Exchange is open from 8:00 to 16:30 GMT, and it is during this time that the price changes actively.
- Diversification: The index includes companies from various industries, which allows investors to spread their risks.
The price of “Footsie” is most influenced by factors such as the state of the world and British economies, commodity prices and the financial condition of individual companies that form the FTSE 100 index.
Overall, the FTSE 100 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 stock trading on the FTSE 100
Trading the FTSE 100 index is suitable for those who want to try their hand at the London Stock Exchange.
The basic principles and mechanics 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.
The advantage of this tool is that the work of the London Stock Exchange practically coincides with the working hours of most European countries, this is convenient if you live in Europe.
The basic mechanism of trading on the FTSE is no different from other exchange-traded assets, some are betting on the rise, while others bet on the price falling.
To successfully trade on the FTSE, it is important to consider a number of factors that influence the movement of the index. These include UK economic news and events such as unemployment, inflation and interest rate , commodity prices, and reports from companies included in the index.
An interesting feature is that FTSE 100 prices are influenced not only by domestic events, but also by global news.
And this is not surprising, because 60% of the companies in the index receive income from outside the UK, as they operate internationally. For this reason, the FTSE 100 is sometimes referred to as a UK-weighted global index.
An interesting feature is that, due to its structure, the FTSE 100 index has a strong bias towards oil and mining shares. Collectively, this segment makes up about 30% of the index's value.
Therefore, changes in global commodity prices affect the price of a given asset much more than some UK data.
Understanding these factors and being able to analyze their impact on the FTSE Index is key to successful trading.
Trading strategies on the FTSE can vary and depend on the individual preferences of the trader. Almost all available exchange strategies , ranging from long-term ones, such as “ Buy and Hold ” to scalping on M5 and M15.
At the moment, most experts, and with them technical indicators , are quite skeptical about the prospects for the price of the FTSE 100. Due to the global crisis, most shares of British companies are becoming cheaper, which ultimately causes a decrease in the value of the FTSE 100 index.