FTSE 100 Trading
What is the FTSE? | AvaTrade Tutorial
FTSE 100 trading
Barclays, Centrica, easyJet, Lloyds Banking Group, Morrison, Royal Mail, Sainsbury, Everybody in England, Scotland, Wales and Northern Ireland knows these and many more. From Belfast to London, from Edinburgh to Cardiff, every subject of Her Majesty is familiar with these companies, which are all part of the FTSE 100 (Financial Times Stock Exchange), better known as the Footsie, possibly the most popular and widely traded index in the world today. Maybe some of you will be thinking: how can it be? Well, this index represents 80% of the market capitalization within the London Stock Exchange (LSE). A Joint venture bewtween the LSE and the Financial Times, the FTSE is the only index not part of any Stock exchange.
The FTSE 100 is a share index of 100 companies listed on the LSE, weighted by market capitalization, and is managed by the FTSE group. As markets open this index is updated and published every 15 seconds. A portion of the FTSE 100 is also made up of other global companies, and it is a mistake to use it as the only indicator of the state of the UK’s economy.
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FTSE 100 History
The index entered the market on the 3rd of January 1984 at a base level of 1000 points. During the dot-com bubble, in 2000 the index saw levels reaching 7,103.98. Thereafter the index saw a fall during the financial crisis of 2007-2010 to low levels that were below 3,500. Seven years later in March of 2017 the highest intra-day value reached and recorded was 7,777.62.
If you want to trade with FTSE, it’s very important you know every single piece of the index. Obviously, you cannot become an expert in just a few weeks or months.
UK AvaTrade is here to be your operative arm. AvaTrade UK is the right place to be updated daily on the London Stock Exchange. For any question, you can contact our support staff by email, phone or chat, so you could plan your activity.
FTSE 100 Index composition
The companies that make up the FTSE 100 are determined quarterly, and formulated on the basis on their values that are taken after the close of business the night before. Should companies not make a certain grade they will be excluded and replaced with a new constituent that has made the grade. This is a very important and crucial element for every company that wants to continue to be part of the FTSE 100. For this reason, every company must operate in the best way to stay in and strengthen the index values. Surely one reason more for UK traders to invest.
| Companies | Index weighting (%) |
|---|---|
| HSBC Holdings | 7.3% |
| Royal Dutch Shell A | 5.43% |
| BP | 5.3% |
| Royal Dutch Shell B | 4.89% |
| British American Tobacco | 4.77% |
| GlaxoSmithKline | 4.21% |
| Diageo | 2.94% |
| Vodafone Group | 2.94% |
| Reckitt Benckiser Group | 2.4% |
| Shire | 2.34% |
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Factors that influence the FTSE index price
Even though most of the composites are UK based, news, political, economic shifts etc. that occur in Europe will have a consequence on the index. Most announcements from the UK that do affect the FTSE are events such as: Interest rate announcements, GDP statistics, UK manufacturing numbers and inflation rates that have all to do with The United Kingdom.
While components of the Footsie may be made up of British companies (as mentioned) a lot of the FTSE’s revenue is generated from outside of the UK, such as the example of most economies like to publish their figures in USD (£) instead of the GBP (£). Furthermore, the FTSE has 5 oil companies that are listed (BP, BG Group, Royal Dutch Shell, Petrofac and Tullow Oil), and their share values are mostly influenced by events that take place in the Middle East. While, 13 of the world’s most popular mining industries are influenced by global events. Changes in the price of the commodity are influenced by all of the markets and the world’s events and this is important to keep in mind when embarking on trading the FTSE.
FTSE 100 Trading information
- The FTSE 100 futures contract is tradable from 7:01 – 19:59 (GMT), Monday to Friday
- The FTSE moves in increments of 0.50
- The margin requirement for trading the FTSE is usually about 2% (i.e. leverage) with most brokers
- The minimum trade size is 0.1 index
- The currency of the FTSE is the British Pound.
Trade the FTSE 100 with AvaTrade UK
A careful analysis and accurate charting is necessary when trading the Footsie. AvaTrade offers all traders, novice and professional, the advantage of up-to-the-minute live feeds and important market information. We built AvaTrade thinking like a trader because we are traders. What you see is what you want. Find the helpful sections about videos, ebook and economic indicators.
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FTSE 100 Trading Main FAQs
- What is the FTSE 100?
The is the U.K. equivalent of the S&P 500 in the U.S. It is an index that was created by the Financial Times Stock Exchange Group, hence the FTSE or “footsie”, and it is comprised of 100 blue chip stocks listed on the London Stock Exchange. The components of the FTSE 100 represent roughly 80% of the market capitalization of the London Stock Exchange. The index includes the integrated oil & gas companies Royal Dutch Shell and BP, as well as banks HSBC and Barclay’s, and pharmaceutical giants GlaxoSmithKline and AstraZeneca. - Should I trade the FTSE 100?
As the London Stock Exchange is the most closely watched market in Europe it is well worth it to both follow and trade the FTSE 100. Often the index will follow moves made by the British Pound as well, since roughly 80% of the companies are multi-nationals that benefit from a weak Pound. This can help inform trades and forecast the direction the index will take, It can also be a good choice to trade the FTSE 100 when its major constituents report good news. - What’s the best strategy to trade the FTSE 100?
The best strategy for trading the FTSE 100 is to first decide what time frame you’ll be trading. Are you looking to scalp the index, day trade, swing trade, or look for position trades? Next is to study the daily and weekly charts to see the long term direction of the market. This will help inform you whether it is wiser to go long or short the market. Finally look for trading signals based on your favorite technical indicators.
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