What is FTSE 100 Index?

TBN Editor July 14, 2023July 28, 2023

Introduction

This work is very useful for beginners to understand the meaning of FTSE 100 and how to trade this index pair.

What is FTSE 100 Index?

FTSE 100 Index is an acronym that stands for Financial Times Stock Exchange Index. This Index measures the performance of the most valuable 100 UK stocks listed on the London Exchange Market (LSE) based on their market capitalization. The stocks added to the list of the FTSE are updated by the FTSE Group. Investors often used the performance of this Index to measure the strength of the UK economy.

How are the stocks added to the FTSE 100 selected?

The stocks added to the list of the FTSE 100 is selected by weighing the market capitalization of all the stocks listed on the London Stock Exchange market. The stocks with the largest market capital from the list are selected and updated after every quarter by the FTSE group. All FTSE 100 Companies, therefore, work hard to promote their company shares so they can remain on the list.

How is the price of FTSE 100 Calculated?

The market price of FTSE 100 is calculated by adding up the prices of the different companies making up this Index and dividing it by their total number. Nonetheless, the price remains very volatile and influenced by the movement of the different stocks making up this Index.

The stocks with the largest market capitalization exert the greatest influence on the price of this Index. Major shifts in the prices of any of the first ten stocks making up the FTSE 100 Index could cause strong volatility in the price of this index.

A simple guide on how to trade FTSE 100

FTSE 100 is mainly offered for trading today as CFDs. To trade this index, one will need to register an account with a broker that offers this index for trading on their platform. We have therefore highlighted below the procedures to follow to trade FTSE 100 as CFD today.

Select your preferred broker: Before choosing any broker for trading, it is good to verify that the broker is fully registered under the major regulatory bodies such as FCA, ASIC, FSA, and CYSEC.

Create an account with the broker: To create an account with any broker requires the individual to login into their website and fill the registration form provided. Here you will need to enter your name, email, phone number, and other relevant information about you.

Complete the identity verification process: Upon successful registration, you will further need to upload your identity documents including your ID card and proof of address. Brokers use this as a way of enhancing their Know-your-Customer (KYC) protocols for security purposes.

Fund your account: The next step after one’s account has been approved is to proceed with funding. Often brokers provide multiple options for funding to make this process an easy one for their clients.

Login into the trading platform to place your order: The final step after one’s account has been funded is to log in to the trading platform provided by the broker (such as Meta trader 4) and then place your order for FTSE 100.

List of the first twenty Stocks that make up the FTSE 100