How To Trade The FTSE 100

Here are some things to remember if you want to know how to trade the FTSE 100, the United Kingdom’s famous financial index. The FTSE 100 is made up of 100 of the largest companies traded at the London Stock Exchange. Between them these companies make up 81% of the total capitalisation available on the LSE. The first point to make is that you do not actually trade the FTSE 100 figure that you see quoted on the financial news on TV or in the papers. This figure is the FTSE 100 cash price. It is calculated once every 15 seconds on weekdays between the hours of eight o’clock in the morning and half past four in the afternoon. On the face of it that sounds fairly impressive but in fact 15 seconds is both too long a period between calculations and eight and half hours is too short a period when we consider how fast the modern financial world moves. So when you want to know how to trade the FTSE 100, remember you will not be trading the FTSE 100 Cash but rather the FTSE 100 Future.

So, it is a matter of learning how to trade the FTSE 100 Future. This opens for business at seven in the morning and continues until nine o’clock in the evening. That is a working day of fourteen hours. The FTSE 100 Future price is recalculated once a second during every one of those fourteen hours. Of course FTSE Future reflects FTSE Cash when the latter is open. When the FTSE Cash is closed the FTSE Future reflects the underlying market. Its longer hours of opening make for less chance of gapping developing, which is something for traders to bear in mind when learning how to trade the FTSE 100.

Remember also when you are wondering how to trade the FTSE 100 that there are quarterly FTSE contracts that enable traders to run their position in a particular share for weeks or even months. These quarterlies are in March, June, September and December and normally they will trade at a slightly different price from the FTSE 100 Future’s. In normal circumstances the price for Quarterly is higher than the Future price, but at times of low interest rates this will not necessarily be the case. Remember that the premiums or discounts available are generated mechanically and do not reflect the views of the market. It is a point to bear in mind as you devise your strategy on how to trade the FTSE 100

Risk warning: Spreadbetting, CFD trading and Forex are leveraged. This means they can result in losses exceeding your original deposit. Ensure you understand the risks, seek independent financial advice if necessary. The value of shares and the income from them may go down as well as up. Nothing on this website constitutes a solicitation or recommendation to enter into any security or investment. 

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