FTSE 100 Index
FTSE - Financial Times Stock Exchange, the FTSE 100 represents the Stock index of the top 100 largest companies in the UK that are listed in the London Stock Exchange Market. The calculation of this index incorporates stocks which are determined quarterly. These stocks included in the FTSE 100 Index represent 80 % of the total market value of London Stock Exchange listed companies.
Because the FTSE 100 stock index tracks 100 companies the index will be more volatile as compared to an index such as the Germany DAX 30 which only tracks 30 companies.
The FTSE 100 Index Chart
The FTSE 100 Index chart is shown above. On the example above the index is named as UK100CASH. As a trader you want to find an online broker that provides this The FTSE 100 Index chart so that you can start to trade it. The stock index example above is of FTSE 100 Index on the MetaTrader 4 Forex and Stock Indices Trading Platform.
Other Information about FTSE 100 Index
Official Symbol – UKX:IND
The 100 component stocks that make up the FTSE 100 Index are picked from the top UK companies. The FTSE 100 share index is closely followed as an indicator of the prosperity of UK businesses. The constituents that make up this index are revised quarterly. The calculation of this index is a simple formula based on market capitalization.
Strategy for Trading FTSE 100 Index
The FTSE 100 Index shows the relative movement of the top 100 stocks in the UK. In general the share value of the top 100 companies will keep moving upwards, therefore this index will also over time keep moving upwards. Should a company not meet the required growth targets, the company will be removed from the index and replaced with another company that has better growth prospects.
As a trader wanting to trade this stock index, the general stock index market direction at any given time will be more bullish than bearish. This is because as long as the 100 companies being tracked are doing good business, then their share value will keep going up, and therefore this index will also keep moving in an upward trend.
As a trader you want to be biased and keep buying as the index moves up. When the UK economy is doing well (most of the times it is doing well) this upward trend is more likely to be ruling. A good strategy would be to buy the dips.
During Economic Slow Down and Recession
During economic slowdown and recession times, companies start to report lower profits and lower business growth prospects. It is due to this reason that investors start to sell stocks of companies reporting lower profits and therefore the stock index tracking these particular stocks will also start to move downwards.
Therefore, during these times stock index trends are likely to be heading downwards and as a trader you should also adjust your trading strategy accordingly to fit the prevailing downward trends of the stock market index that you are trading.
Contracts and Specifications
Margin Required Per 1 Lot - £ 70
Value per 1 Pip - £ 0.1
Note: Even though the general trend is generally upwards, as a trader you have to factor in the daily market volatility, on some days the stock index may oscillate or even retrace, the stock index market retracement may also be significant at times and therefore as a trader you need to time your entry precisely using this strategy: Stock indices trading strategy and at the same time use proper money management rules just in case of more unexpected volatility in the market trend. About money management rules in stock index trading topics: What is stock index money management and stock index money management methods.