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A Brief Note on FTSE 100 Index Trading

You might have heard FTSE 100 but you don’t know much about it and how you can invest in it.

WHAT IS A STOCK MARKET INDEX?

A stock market index is measurement of the stock market the price of which is calculated from the value of its constituents.

WHAT IS FTSE 100 INDEX?

It is basically representations of 100 companies (most of the technology companies) with the highest value on the London Stock Exchange. Those large companies also known as blue chip companies. The term blue chip comes from poker and represents the chip with the highest value.

  It started in January 1984. And now it is responsible for the largest volume of Shares being exchanged every day on the exchange. FTSE 100 index trading is the best way to take part in the overall growth of the UK stock market.

FTSE 100 is also known as the UK 100 indexes. It is the simplest way to understand the UK stock Market for beginners. It is not too different from other trading but obviously it does require some experience and knowledge.

People are using FTSE 100 to gain a broad exposure to large UK listed shares.

HOW TO TRADE FROM FTSE 100 INDEX?

Like any stock index no-one can BUY & SELL like equity? Trading can be done using CFDs or an exchange-traded fund product. It’s sometimes referred to as The UK 100. Constituents of FTSE 100 are decided on a quarterly basis, usually in march, June, September and December. During this process the market capitalization of the companies is determined and it’s decided whether or not they will be listed on the index. When the fortune of all the companies within the FTSE 100 rise and fall, some companies will leave the FTSE 100 index allowing others to join. It is popular for its volatility. You can trade it using contracts for different CFDs.

WHAT DRIVES THE FTSE 100 INDEX?

Mainly 3 main things drive the FTSE 100.

1. Currency.

The movement of the currency is a huge part of FTSE 100.

2. Energy & Metal Prices

3. Result

WHEN CAN YOU TRADE ON THE FTSE 100?

This index opens at 8:00 AM (UK TIME) and closes at 4:30 PM (UK TIME). But some market makers will continue to quote prices on this index both in advance of the opening time and after the closing hours.

FTSE is the most liquid during those market hours of 8:00 am until 4:30 PM when the London Stock Exchange is open. Quality of exchanges is also affected by the Asian market as a lead indicator and tends to follow the U.S markets when they put around 2:30 AM London time.

THERE IS SOME STRATEGY YOU CAN FOLLOW FOR TRADING –

1. Trend Following – For starters, a basic strategy that is used by many traders, of all experience levels. This strategy is very popular because of its simple identity and trade, and many times, strong trends can bail you out of an incorrect set of buy and sell rules. Always keep in mind the trend is your best friend when it comes to trading. It is the best and simple way to cover up any strategy imperfections, by identifying the strongest trends in the market.

2. Buying the Dip – This basic investment strategy refers to purchasing more assets as the price falls, or once its settle. It is recommended to use in a stagnant or bull market. Here the usual trends are rising or sideways, rather than in a bear market. The logic of the BTD strategy involves analyzing charts, short term and long term average movements, historical support trends, and laddering buys.