How to trade the FTSE 100
The FTSE 100 – the UK’s most popular index – offers plenty of opportunities for traders. Learn how to get exposure to FTSE 100 price movements with cash indices and index futures, as well as ETFs and individual shares.
Start trading today. For account opening enquiries call 1800 601 799 between 9am and 6pm (AEDT) weekdays, or email newaccounts.au@ig.com.
Contact us: 1800 601 799
Start trading today. For account opening enquiries call 1800 601 799 between 9am and 6pm (AEDT) weekdays, or email newaccounts.au@ig.com.
Contact us: 1800 601 799
If you’re ready to open a position on the FTSE 100, follow these three steps:
1. Decide whether you want to trade or buy and sell
There are several ways to get exposure to the FTSE 100 – trading in ETFs and individual shares, or trading on the index’s value.
2. Create a trading plan
Before taking a position on the FTSE 100, you'll need to decide whether you're a short- or long-term trader – and how you're going to manage your risk.
3. Open a live account
Then, open and fund any or both of the following accounts – CFD trading and share trading - and fill in our application form.
To help you decide how to trade in the FTSE 100 we explain each method in detail below.
How can you trade the FTSE 100?
With us, there are a number of ways to get exposure to the FTSE 100. You can:
When trading the FTSE 100, you’ll do so using CFDs. CFDs are financial derivatives, which means that you never take ownership of any underlying assets.
Instead, you’ll speculate exclusively on the underlying asset’s price movements – in this case, either fluctuations in the index level of the FTSE 100, or movements in the prices of FTSE 100 ETFs or shares.
When investing in the FTSE 100, on the other hand, you’ll do so via our share trading platform using our custodial model. This means that as a registered broker we manage, hold and safeguard securities you choose to buy and sell on your behalf. Via our custodial model, you’ll be able to buy and have a stake in actual assets – for example, shares in a FTSE 100-tracking ETF or FTSE 100-constituent company. You’ll also be entitled to dividends if any are paid, and granted voting rights if applicable.
But, please bear in mind that all trading and investment incurs risk. Before trading or investing, you should always understand the risks involved, and consider whether you can afford the potential monetary losses.
Trade the FTSE 100 index directly
- Access the performance of the UK’s largest 100 companies from a single position
- Trade on the index’s price (ie its level) directly using CFDs
- Get exposure to the index in a market with high liquidity
- Go either ‘long’ (if you think the price will rise) or ‘short’ (if you think the price will fall)
- Trade commission free with CFDs as charges are included in the spread
- Choose our FTSE 100 ‘cash’ (spot) market to take a position in the short term
- Choose our FTSE 100 futures or options markets to take a position - you’ll do so using CFDs
- Trade 24/7 (except 7am to 5pm on Saturday and 7.40am to 8am on Monday AEST*)
* Times listed are affected by both UK and AU clock changes in the year, and will be adjusted by +/- 1 hour accordingly.
Trade or buy and sell FTSE 100 ETFs
- Take a position on the price of the ETF – calculated using the fund’s net asset value (NAV) – rather than on the current index level of the FTSE 100
- Take a position on FTSE 100 ETF price movements with CFD trading without owning the underlying asset
- Use CFDs to go long or short on your position
- Buy and hold actual shares in a FTSE 100 ETF by opening a share trading account
- Invest in FSTE 100 ETFs at $0 commission using our share trading platform1
|
Trading the FTSE 100 index directly |
Trading or buying and selling a FTSE 100 ETF |
Trading or buying and selling FTSE 100 shares |
Account types |
CFD trading account. |
CFD trading account to trade, or share trading account to invest. |
CFD trading account to trade or share trading account to invest. |
Market hours |
24/7 (7am to 5pm on Saturday and 7.40am to 8am on Monday AEST*). Please note that our Weekend UK 100 market is separate to the main FTSE 100 market. |
Trade or invest in UK-listed FTSE ETFs when the LSE is open - 5pm to 1.30am, Monday to Thursday and 5pm Friday to 1.30am Saturday (AEST*). |
When the LSE is open - 5pm to 1.30am, Monday to Thursday and 5pm Friday to 1.30am Saturday (AEST*). |
Timeframe |
Short-term. |
Short-term for trading and longer term for investing. |
Short-term for trading and longer term for investing. |
Costs |
Commission-free, with spreads from just 1 point.
Cash (spot) trading incurs overnight fees, but none for index futures. |
Invest in FTSE 100 ETFs from £3 commission per trade.1
Min commission £10 for CFD ETFs. |
Invest in FTSE 100 shares and ETFs from £3 commission per trade.1
Min commission £10 for CFD shares. |
* Times listed are affected by both UK and AU clock changes in the year, and will be adjusted by +/- 1 hour accordingly.
How to start trading or investing in the FTSE 100
Open your FTSE 100 trading or investing account
The type of account you’d open depends on your timeframe preferences, goals and strategy. With a CFD trading account, you can enter and exit positions on the FTSE 100 quickly in highly liquid markets.
Because CFDs are derivatives, you can take a position on both rising and falling prices by going ‘long’ or ‘short’. Importantly, our derivatives enable you to trade the FTSE 100 index directly. This gives you exposure to the performance of the UK’s top 100 shares from a single point of entry.
CFDs are leveraged, so you can open a trade by depositing only a fraction of the total value of your position. But, because your total exposure is greater than the deposit (known as ‘margin’), your losses could substantially outweigh this initial amount. When trading with leverage, it’s vital to take steps to manage your risk.
If you’d prefer to buy and hold or buy and sell instead of trading on price movements with derivatives, you can invest in FTSE 100 ETFs and companies through our share trading platform. When investing in ETFs or shares, you’re doing so via our custodial model.
To invest in a FTSE 100-tracking ETF or FTSE 100-constituent company, you’ll need to commit the full value of the shares upfront because leverage isn’t available. While you might need more initial capital to get started when compared to trading, your losses are capped at this amount. That said, you should be aware that you might get back less than your initial outlay.
Take your FTSE 100 trading or investing position
Here’s a more detailed look at the various ways you can take a position using CFDs or share trading.
Trading CFDs on the FTSE 100
A contract for difference, or CFD, is an agreement to exchange the difference in price of an underlying asset, as measured from the time the contract is opened until the time it’s closed.
For example, you believe that the FTSE 100 is set to rise from its current level of 7000. So, you buy a FTSE 100 CFD worth $10 per point. Your forecast is correct, and you close your position when the market reaches a sell price of 7100. The difference is 100 points, so your profit is $1000 – excluding other costs.
If, however, the market had moved against you, and you closed at a level of 6900, your loss would be $1000 – excluding other costs.
Trading CFDs on FTSE 100 cash indices
This is the most direct way to access the performance of the FTSE 100 with us. Trade at the current market price and receive tight spreads. But, if you’d like to hold your position open overnight – or for a longer period – consider trading CFD futures or options as our cash (spot) CFDs incur overnight funding fees if you hold your position open after 10pm UK time.2
Our out-of-hours and weekend offering enables you to trade the FTSE 100 almost 24/7 (with the exception of 7am to 5pm on Saturday and 7.40am to 8am on Monday, AEST*). Your weekend positions are automatically rolled over to a weekday position, but you’ll have to open any weekend positions separately from your weekday trades.
* Times listed are affected by both UK and AU clock changes in the year, and will be adjusted by +/- 1 hour accordingly.
Trading CFDs on FTSE 100 index futures
Trading FTSE 100 futures means you agree to trade the index at a specific price on a specific date. With our index futures, overnight funding fees are included in the spread, meaning that you can hold positions for a long time without this additional cost. When trading futures CFDs on indices, you won’t pay a commission.
Trading CFDs on FTSE 100 options
When you trade options via CFDs, you’ll be using the derivative to speculate on an option’s premium – which will fluctuate as the probability of the option being profitable at expiry changes. With us, CFD options cannot be exercised early and are either traded through the duration or cash-settled.
For example, if you buy a CFD on a FTSE option in a size of $10 per point you would earn $10 for every point the options price rises above your entry level.
Please remember that all trading incurs risk. Options trading is often only recommended for experienced traders.
CFD trading on FTSE 100 ETFs
Open a position on a FTSE 100 ETF with a CFD and speculate on the collective performance of the UK’s top 100 companies. The most common form of FTSE 100 ETF is a weighted tracker, which mirrors the make-up of the FTSE 100 directly.
Examples of weighted trackers include the Vanguard FTSE 100 UCTIS ETF and the iShares Core FTSE 100 UCITS ETF. However, we don’t offer CFD futures on ETFs.
Our charges include a commission of between 0.1% and 0.35% on each side of the trade (with a minimum fee of £10) and an overnight funding fee if you hold your position open after 10pm UK time (international times may vary).2
CFD trading on FTSE 100 shares
With us, you can trade CFDs on all the FTSE 100 shares. Trading CFDs enables you to take a speculative position, trade with leverage, or go short. Our charges include a 0.1% commission on each side of the trade (with a minimum fee of £10) and an overnight funding fee if you hold your position open after 10pm UK time (international times may vary).2
If you’d rather buy and own shares, you can do so through our share trading platform.
Investing in the FTSE 100 with share trading
When you invest in the FTSE 100 via a share trading account, you’ll buy and have a stake in actual shares in an ETF or company via our custodial model. This entitles you to dividend payments if the fund or company grants them. Investing is usually better suited to those willing to take a longer-term view.
As you buy and hold shares when investing, you’ll be restricted to ‘going long’ (you’d aim to buy low and sell high at a later date to earn a profit). Additionally, you won’t be able to trade with leverage when using our share trading platform – instead, you’ll have to commit the full value of the investment upfront.
Whereas this caps your risk, if your shares depreciate over the period you’ve held them, you’d make a loss on your investment and receive back less than what you initially put in.
With us, you can invest at $0 commission per trade for UK-listed shares and ETFs.1 As passively managed funds, ETFs enjoy the benefit of avoiding the large performance fees typically associated with actively managed funds.
Buying FTSE 100 ETFs with share trading
Buying shares in a FTSE 100-tracking ETF is one of the most traditional ways for investors to gain access to the whole index. FTSE 100 ETFs will either buy assets – eg shares appearing in the index – or use derivative instruments like futures contracts to mimic the performance of the underlying. If, for example, the FTSE shows positive growth, the tracking ETF will mirror that growth as closely as possible.
The most common form of FTSE 100 ETF is a weighted tracker, which mirrors the make-up of the FTSE 100 directly. Examples of weighted trackers include the Vanguard FTSE 100 UCTIS ETF and the iShares Core FTSE 100 UCITS ETF.
The above graph plots the returns on an initial $10,000 investment into the iShares Core FTSE 100 UCITS ETF against its benchmark and a cash savings account earning 1.5% interest per annum. Whereas the data show a higher return on the ETF, it’s important to remember that cash savings don’t incur the same risks associated with investing.
An index ETF is one of the most effective ways to diversify an investment portfolio, thereby mitigating a portion of the risk of holding just a few, concentrated assets. With our share trading service, you’ll pay $0 commission per trade.
Buying FTSE 100 shares with share trading
Depending on your investment goals and appetite for risk, you could invest directly into shares of FTSE 100 constituent companies through a share trading account. You won’t get exposure to the full index, unless you buy all the shares at the correct weighting, but you’ll be able to target the largest individual companies by market capitalisation.
Buying individual shares also allows you to target particular sectors in the FTSE 100 that may have a number of constituents within the FTSE 100.
Often, these companies offer income streams by way of dividends and show positive results over long periods of time – although this is never a given, as past results can at no time guarantee future returns. With our share trading service, you’ll pay $0 commission per trade.
What moves the FTSE 100’s price?
Understanding what influences the FTSE 100’s price is important not only for opening your position, but also for knowing when to exit it. Amongst many other factors, the index’s price is moved by:
- Economic events: to cite but one example, the economic effects of the Covid-19 pandemic saw the index experience significant volatility throughout 2020, including a drop from the 7600 level to below 4900 in just over two months (-35.5%)
- Exchange rates: fluctuating exchange rates can affect the FTSE 100’s price because its constituents earn a lot of their income in other countries
- News releases: certain news releases are generally followed by a period of volatility in the market. If the news pertains to any of the industries or constituents of the FTSE 100, its price may be affected
- Earnings reports: changes to FTSE constituents’ valuations can have a substantial impact on the index price, depending on the weight of the shares
- Commodity prices: because around 15% of companies on the FTSE 100 are commodity shares, commodity price fluctuations can influence the index’s price quite heavily
Traders can use a combination of fundamental analysis and technical analysis before trading the FTSE 100, and should follow their trading plan and risk management strategy.
Refine your FTSE 100 trading strategies
Refining your trading and investment strategies is an on-going project. Below are just a few tips to consider as you continue to develop your knowledge and master your craft.
- Decide on your trading style: there are four main trading styles – scalping, day trading, swing trading and position trading. Each trading style describes how often you place a trade, and how long you keep those trades running
- Study charts and price action: daily and weekly charts can help you to gauge market sentiment, while price action can help you get a feel of what the market might do next
- Use technical analysis and indicators: it can be helpful to use technical analysis and trading indicators as part of your trading strategy to identify certain signals and trends within the market
- Look for FTSE trading signals: by looking at the FTSE 100 chart, you should be able to tell if it is in a trend. You can confirm trading signals with momentum indicators such as the stochastic oscillator or relative strength index (RSI)
- Set trading alerts: trading alerts enable you to set specific criteria for the FTSE 100 price and be notified immediately once the criteria have been met
- Follow news: every time news about a company, such as earnings, is released, it can affect share prices. Keep a close eye on the economic calendar to help you trade according to the latest events
What else you need to know about the FTSE 100
How is the FTSE 100 calculated?
The FTSE 100 is calculated by weighing all shares listed on the London Stock Exchange (LSE) by market capitalisation. The 100 companies with the highest market cap make it onto the index. Companies with a higher market capitalisation will represent a higher weight in the index and shares with higher weightings have a bigger effect on the FTSE 100’s price.
What are the FTSE 100’s trading hours?
The FTSE 100 shares and ETFs trading hours are 5pm to 1.30am AEST. With us, however, you can trade our exclusive weekend trading hours –from 7pm Saturday to 9.40am Monday AEST.* CFD trading on the index is open 24/7 (except from 7am Saturday to 5pm Saturday, AEST).*
Moreover, our CFD FTSE 100 futures trade 24 hours (8am Monday to 7am Saturday, AEST).*
*Our trading hours are based on UK hours, and are converted to AU time zones. This means that the times listed are affected by both UK and AU clock changes in the year, and will be adjusted by +/- 1 hour accordingly.
FAQs
What is the FTSE 100?
The FTSE 100 is an index of the UK’s largest 100 public companies by market capitalisation. It has become a popular way to gain exposure to the UK stock market and track the performance of the country’s economic health.
The market capitalisation of the index has grown significantly since its inception in 1984, as its constituents have experienced success and growth.
With us, there are a number of ways to gain exposure to the FTSE 100. You can:
- Trade the FTSE 100 index directly
- Trade or invest in FTSE 100 ETFs
- Trade or invest in FTSE 100 shares
When trading the FTSE 100, you’ll do so using CFDs. Here, you’ll speculate exclusively on the underlying asset’s price movements – in this case, either fluctuations in the index level of the FTSE 100, or movements in the prices of FTSE 100 ETFs or shares.
When investing in the FTSE 100, on the other hand, you’ll do so via our share trading platform. This means that you’ll buy and own actual assets – for example, shares in a FTSE 100-tracking ETF or FTSE 100-constituent company.
What should you know before trading the FTSE 100?
Before trading the FTSE 100, make sure you do your research and understand how the index works. Then, decide whether you want to trade or invest.
How do companies get onto the FTSE 100?
To get onto the FTSE 100, a company must be listed on the London Stock Exchange (LSE) and it must be one of the top 100 companies by market capitalisation on the exchange. If its market capitalisation drops drastically, a company might lose its listing on the FTSE 100.
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1 Applicable to share trading only. Other fees and charges may apply. Please visit our Share Trading charges and fees webpage for the full list of fees.
2 Overnight funding is the charge you pay for keeping cash CFD trades open past 10pm UK time (international times may vary); we‘ll make an interest adjustment to your account to reflect the cost of funding your position. Learn more about how overnight funding is calculated.
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