What is the FTSE? | AvaTrade Tutorial
Trading FTSE 100
The FTSE 100 (Financial Times Stock Exchange), known better as the Footsie, is possibly the most popular and widely traded index on the stock market in the world today. How? This index trading represents 80% of the market capitalization within the London Stock Exchange (LSE). With a Joint venture the LSE a co-owner along with the Financial Times, and 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.
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The indication of how prosperous United Kingdom’s top companies are, is led by the FTSE index, however 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.
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. There after 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.
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.
|Companies||Index weighting (%)|
|Royal Dutch Shell A||5.43%|
|Royal Dutch Shell B||4.89%|
|British American Tobacco||4.77%|
|Reckitt Benckiser Group||2.4%|
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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 trading 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
A careful analysis and accurate charting is necessary when trading the Footsie. AvaTrade offer all traders, novice and professional, the advantage of up-to-the-minute live feeds and important market information. Take advantage of our customer service when markets are stable or volatile.
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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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