HFM information and reviews
HFM
96%
FXCC information and reviews
FXCC
92%
FxPro information and reviews
FxPro
89%
FBS information and reviews
FBS
88%
Vantage information and reviews
Vantage
85%
XM information and reviews
XM
82%

What is the FTSE 100 and how to trade it?


The FTSE 100, also known as the Financial Times Stock Exchange 100 Index, is a stock market index that measures the performance of the largest 100 companies listed on the London Stock Exchange (LSE). The FTSE 100 has been around since 1984 and is one of the most well-known stock market indices in the world.

In addition to its use as a benchmark, the FTSE 100 can also be used as a tool for active investors who wish to trade stocks that are included in the index.​

In this article, we'll take a look at what makes up the FTSE 100 and how it's calculated. We'll also discuss some of the factors that can influence its price movements and the multiple ways traders can start gaining exposure. Before we discuss how to trade indices like the FTSE 100, let us have a look at what this index represents and the largest companies included in it.

What is the FTSE 100?

The FTSE 100 index consists of the 100 largest companies listed on the London Stock Exchange (LSE) by market capitalisation. The index was created on January 3rd 1984 and had a value of 1000 points.

The index is maintained by the FTSE Group (trading as FTSE Russell), a subsidiary of the London Stock Exchange (LSE) Group.

While the FTSE 100 is a popular and widely followed index, it is a rather weak indicator of how the UK economy is performing, as the largest constituents are multinational corporations with an international focus. Investors trying to gain more exposure to the UK economy might prefer the FTSE 250 or FTSE SmallCap Index.

How is the FTSE 100 calculated?

The FTSE 100 is an arithmetic weighted index and is calculated using the free-float market capitalisation of its constituents. This means that fluctuations in the share price of larger companies will have a greater impact on the value of the FTSE 100 than those of smaller companies.

What sectors are in the FTSE 100?

Materials is the largest sector in the FTSE 100, making up almost 20% of the index. This is followed by Financials at 17% and Consumer Staples at 16%. Energy and Industrials come next at 12.4% and 8.7% respectively. Health care, consumer discretionary and communication services also have a notable weight in the index.

What are the top 10 companies in the FTSE 100?

The top 10 companies in the FTSE 100 index are:

FTSE 100 share price

As of December 6th, the FTSE 100 is consolidating around 7170 points. Like all other stock indices, the FTSE 100 crashed in March 2020 due to the pandemic. The index has been slowly recovering since then, although it still did not manage to reach the pre-pandemic high while its US and most of its European peers managed to reach new record highs.

The FTSE 100 started at 1000 points in 1984. The index reached an all-time high of 7903 points in May 2018.

How to trade FTSE 100?

Contract for Difference (CFDs) is one of the ways traders can trade the FTSE 100 cost-effectively and efficiently. Generally, brokers offer a CFD based on the Cash Index (UK100) and a CFD based on the underlying Futures contract (FTSE100.fs).

When trading indices online using CFDs, traders can speculate on the direction of the underlying instrument (the FTSE 100) without owning it or any of its constituents. Traders can make use of leverage and will have the ability to go both long and short.

This can prove especially useful during a downturn. Most investors want to avoid a reshuffling of their portfolio as the costs can quickly add up and it is incredibly difficult to time the market correctly. Therefore, instead of selling a large part of a portfolio when traders anticipate a correction, CFDs could be used to speculate on falling prices.

Whether the Cash CFD (UK100) or Futures CFD (FTSE100.fs) will be more suitable to a trader, it will primarily depend on his trading style. If the trader holds positions for a short period of time,  UK100 might be preferred as it has low spreads. On the other hand, if the is a long-term trader  FTSE100.fs might be preferred as there are no swap charges.

Cash CFDs have lower spreads and are more suitable for short-term traders, while Futures CFDs are popular amongst position traders as no daily swap fees are charged. Traders should note that futures CFDs are subject to a rollover. A rollover is when a trader moves their position from the front-month contract (close to the expiration date) to another contract date in the future, to avoid the costs or obligations associated with the settlement of the contracts. Contract rollovers are profit neutral.

How to invest in FTSE 100?

Exchange Traded Funds (ETFs) are the easiest way to invest in the FTSE 100 index. It is more cost-effective than buying the individual shares and the rebalancing is done quarterly.

While ETFs can be leveraged too, it will usually have less flexibility than trading CFDs. However, if a long-term investor and don't really want to actively trade the product, ETF might be found  as an efficient solution.

There is a variety of ETFs available from different providers. When choosing an ETF, traders should go through the factsheet that is provided by the broker and become familiar with the specifications of the product and the charges involved.

The largest FTSE 100 ETFs are (by AUM) are:

The cheapest FTSE 100 ETFs (by TER - Total Expense Ratio) are:

Trading FTSE 100

What moves the FTSE 100?

There are a few things that move the FTSE 100, the main ones are listed here:

What is the average return on the FTSE 100?

The FTSE 100 has achieved an annualised return of 4.8% over 5 years. As we can see from the FTSE 100 index factsheet, the FTSE 250 and the FTSE SmallCap have outperformed the FTSE 100, although investors must take into consideration that both indices have higher volatility.

What does the performance of the FTSE 100 show us?

The performance of the FTSE 100 is far from impressive when compared to some of its international peers - such as the Dow Jones in the United States or the DAX in Germany. Brexit and the COVID-19 pandemic are certainly two major factors that have weighed on the performance of the FTSE 100. 

However, it is a fact that the FTSE 100 heavyweights consist of large companies in traditional industries such as pharmaceuticals, banking, mining and oil & gas. There are very few IT companies that could have made up for the poor performance of certain sectors such as financial services and oil & gas.

While the FTSE 100 is fairly stable and its constituents distribute solid dividends, investors looking to gain exposure to the UK stock market might also consider other indices such as the FTSE 250 and the FTSE Small Cap.

List of FTSE 100 companies

#source


RELATED

HotForex Grand Seminar 2018

Our webinars are designed to improve your FX knowledge and help you hone your trading skills to give you the confidence you need to trade the markets...

FXOpen Forex Partnership Program

We offer our Forex partnership program to traders, Forex brokers, and website owners who publish information about fiat and crypto-currency trading...

Dogecoin Trading with Leverage

Cryptocurrency CFD trading, particularly with leverage, has garnered significant attention in recent years, and Dogecoin is no exception. When you trade DOG/USD with a reputable forex broker...

Cardano: What Price Will the Peer-Reviewed Crypto Reach?

Cardano was late to the crypto market compared to many others, but the altcoin crypto asset is brimming with innovation, giving it incredible projected...

A Guide to Trading Metals

Precious metals such as gold and silver have been recognised as valuable metals for a long time, but gold and silver are not the only ones out there for investors

Soulbound Tokens (SBTs): Pioneering Digital Identity in the Blockchain Era

Soulbound tokens (SBTs) represent a groundbreaking concept in blockchain technology, championed by Ethereum co-founder Vitalik Buterin and inspired by mechanics from the popular fantasy game...

What is tokenomics? Understanding the token economy

With thousands of cryptocurrencies available, traders are beginning to think to themselves "What makes one crypto more valuable than another?" Tokenomics will help make sense of this.

A concise guide on investing in Ripple CFDs

Before the advent of digital currencies, man has been using paper or fiat currencies which are controlled by governments or central banks, restricted by location...

Why trade indices?

Indices trading is the trading of Contracts for Difference (CFDs) on a stock market index. This is what we’ll be examining in this article. If you ask why trade indices let’s find it out...

Is money really its worth

While using money as a form of exchange in our everyday life, very few people really understand how money receives its value. Money is used practically under...

What is hedging? Protecting assets from market storms

Hedging in the financial markets is one of the risk management techniques. It’s a sort of insurance cover to protect against potential losses from an investment...

What is a Decentralised Autonomous Organisation (DAO)?

DAO is the new buzzword in the array of crypto offerings aiming to disrupt the traditional models of collaboration and organisation. A DAO can be used to create...

Which Cryptocurrency can you realistically trade online?

The financial crisis led to the worldwide distrust in the financial system. To help solve this problem, an anonymous person...

How to stake Ethereum

Ethereum is switching into a proof-of-stake consensus to allow the network to achieve scalability. Ethereum staking is when people lock up Ether (ETH) for a given time...

Mastering the Art of Forex Profit Calculation

Forex trading, a venture both intricate and potentially rewarding, hinges on the precise understanding of profits and losses (P&L). As each trade unfolds, the fluctuating forex market presents a myriad of risks...

Libertex: Crypto bears getting ready to hibernate

After a short hiatus, the cryptocurrency market is back in the spotlight once again. Just a matter of weeks ago, there was talk of burst bubbles, lost fortunes and even a long...

Maximize Your Profits in 2022 Through the Best Forex Advisors

Practically all modern Forex expert advisors are built on the foundation of the complex programming language called MetaQuotes versions 4 and 5, which are also used...

What Forex Pairs to Trade in 2021: Our Top Picks

The year 2020 is gone, but the problems it has brought upon the world and all of the major Forex markets will linger in 2021 as the COVID-10 pandemic is far from...

Bitcoin Investment: A Guide To Trade Bitcoin

As you may already know, cryptocurrency, especially bitcoin, is the most traded financial instruments in recent history. Bitcoin is a popular digital currency among...

Exness now accepts global customers

Having recently expanded our global reach and established a UK-based entity, Exness (UK) Ltd, authorized and regulated by the UK's Financial Conduct...

FP Markets information and reviews
FP Markets
81%
RoboForex information and reviews
RoboForex
77%
IronFX information and reviews
IronFX
77%
T4Trade information and reviews
T4Trade
76%
Exness information and reviews
Exness
76%
Just2Trade information and reviews
Just2Trade
76%

© 2006-2025 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.