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Trading the FTSE 100

The FTSE 100, or Financial Times Stock Exchange 100 Index, is a stock market index representing the performance of the 100 largest companies listed on the London Stock Exchange (LSE) based on market capitalization. It is one of the most widely followed equity indices in the world and serves as a benchmark for the overall health and direction of the UK stock market.

Established in 1984, the FTSE 100 is maintained by the FTSE Russell, a subsidiary of the London Stock Exchange Group. The index is calculated in real-time and is weighted by market capitalization, meaning that larger companies have a greater influence on its movements.

The FTSE 100 includes companies from various sectors such as finance, energy, healthcare, and consumer goods, offering a diverse snapshot of the UK and global economy.

Fluctuations in the FTSE 100 are often influenced by global economic conditions, geopolitical events, and changes in commodity prices, making it a crucial indicator for international investors.

What affects the price of the FTSE 100?

The FTSE-100 Index in effect reflects the prices of the biggest companies listed in London, regardless of nationality.

The index does not provide comprehensive exposure to companies with a strong UK bias, as many large international corporations are included in the index. Typical examples include HSBC (global banking giant), Royal Dutch Shell (Netherlands oil company) and Antofagasta (Chilean miner). Many foreign or global companies like to list in London as this helps them to raise capital via a UK share issue.

The index uses a free float methodology to determine the impact of individual share prices on the daily performance of the index. This means only shares that are being traded freely count towards the capitalisation figure, not shares held by insiders or other strategic shareholdings.

What requirements are there for joining the FTSE 100?

The components of the index are reviewed every quarter. Companies in the FTSE 250 index, which have reached a capitalisation that would place them in the top 90 companies in the FTSE 100 Index, are promoted.

When is the FTSE 100 open for trading?

The index opens at 08.00 UK time, and closes at 16.30. Some market makers will continue to quote prices on this index both in advance of the opening time, and after closing time, as there are also futures contracts available to trade outside normal trading hours.

How can I trade the FTSE 100?

The FTSE 100 Index is readily available to traders online as a Contract for Difference or Exchange Traded Fund. UK residents can trade the index through a tax-free Spread Betting broker.

The FTSE 100 is also a popular index for use with index-linked investment products, including guaranteed products, that are frequently sold by retail banks.

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