The FTSE 100 (pronounced “footsie”) is an index which follows the London Stock Exchange’s largest 100 companies by market capitalization. Other popular names for the FTSE100 include: FTSE 100 index, Financial Times Stock Exchange 100 Index, or simply “The FTSE”.
In 1984, the Financial Times Stock Exchange set out to develop an index that was similar to other indices from different countries. This specific index would focus on the performance of companies listed on the London Stock Exchange (LSE), allowing traders to view a snapshot of the LSE at any given time.
Traders quickly recognized the potential for trading the FTSE100 (UK100) as an instrument, similar to how a share or commodity is traded. This made the index a household name alongside the S&P 500 (USA500), the Dow Jones Industrial Average- DJIA (USA30-Wall Street), and other popularly traded indices.
How is the FTSE 100 calculated?
The FTSE100 uses a Float-Adjusted Market Capitalization system. The Financial Times and the London Stock Exchange worked together to compile the top 100 companies on the LSE, based on the size of a company’s total market capitalization. Only float (openly traded) shares were used to determine the valuation.
This means that a company’s size is not based on just share availability or trade volume, but according to the collective value of all their publicly traded shares.
Each company is then given a specific ‘weight’ in the index. Values are recalculated at the end of each trading day so the index can be updated.
Can I profit from trading the FTSE100?
While the FTSE100 can not be traded as an instrument itself, traders can use various other means to open positions on this popular index. One popular way of doing this is by trading CFDs,which are based on FTSE100 futures contracts, allowing for positions to be opened and executed during regular trading hours.
Profit can be recognized by opening a ‘Buy’ position (going long) or a ‘Sell’ position (going short) that moves in the trader’s favour. These positions also expose traders to risk and potential losses.
Who manages the FTSE100?
The London Stock Exchange Group (LSEG) owns the FTSE group which manages the FTSE100, FTSE250, and other FTSE indices.
They are responsible for calculating and updating the daily valuation of the indices. They also meet every quarter to review the status of companies on the listing and discuss the eligibility of growing companies who may be added to the listing.
FTSE100 trading hours
Since the FTSE100 lists the 100 largest companies on the London Stock Exchange, its value fluctuates throughout the trading day. As listed above, Plus500 CFDs allow for you to trade on fluctuations throughout the day, but official numbers are published by the LSEG after each day’s closing.
The London Stock Exchange is open daily from 8:00AM - 4:30PM London time, excluding weekends and holidays.
When trading UK100 CFDs on the Plus500 platform, the instrument is active for 20 hours on trading days from 1:00 AM to 9:00 PM London time. This allows traders to speculate on pre-trading and after hours trading values.
The FTSE100 has become a benchmark index which global traders rely on. Following, this key index gives an insight into the British economy and global markets as a whole. Together with the USA500, traders can speculate on the UK, US, and global economy as a whole.