As with most stock indices the Footsie 100 Index is a critical gauge of overall market performance. What makes the Footsie 100 Index somewhat unique is the fact that it is, indeed, one of the most widely referenced indices in the financial industry. The FTSE, as it is sometimes referenced, is simply a compiled index of shares of stock that represents 100 of the most financially sound companies found on the London Stock Exchange. More specifically these 100 indexed companies represent the most financially stable businesses with the highest market capitalization on the London Exchange.

The name of the index has its origin in the two companies that comprise its ownership. Those two companies are the Financial Times along with the London Stock Exchange. The initials of each word of each company create the acronym “FTSE” for which the index is now commonly called. The FTSE saw it’s beginning in the mid-1980s and has grown steadily since its inception. The FTSE represents slightly over 80% of total market capitalization of the London Stock Exchange. This fact in and of itself points out the importance and immense value of this key index. The companies that comprise the index are referred to as constituents, and are normally decided upon each financial quarter by FTSE ownership.

Each company listed on the FTSE is weighted according to the overall size of the company, and ultimately by its total market capitalization. This weighted average adjusts for a company’s size and keeps market capitalization averaging in check. The respective list of constituents found in the Footsie 100 Index include such highly regarded companies as Associated British Foods, BAE systems, BP, Barclays, Carnival, GlaxoSmithKline, HSBC, International Consolidated Airlines Group, Intercontinental Hotels Group, Land Securities Group, Lloyds Banking Group, Royal Bank of Scotland Group, Royal Dutch Shell, Scottish and Southern Energy, Standard Chartered Bank, as well as Unilever and Vodafone.

The FTSE has great financial significance and is important for a number of reasons well beyond the simple stock market indications that it typically represents. While the index clearly offers a check of the pulse and overall health of the market it has a much broader function as well. That function is to actually measure in some degree the overall financial health of the whole British economy. Because the FTSE provides a good indication of current economic conditions it tends to move in tandem with the country’s economy. When the economy is suffering and unemployment is high the Footsie 100 Index will move with a predictable downward trend. Conversely, when the economy is booming the index will move appropriately.

In addition, the FTSE is routinely traded on the open market by investors seeking short-term and long-term profits. A high volume of shares is routinely traded on the London stock exchange each day and can easily represent billions of dollars in trade share equity. Along with regular shares of the FTSE that are traded daily there are a number of derivative type products that are also traded each day which are coupled to the FTSE. From puts and calls to going long and short, the variety of investment options tied to the FTSE are extensive and at times complex.

The FTSE also plays a major role in mutual funds and professionally managed funds. Because the index is comprised of major corporations with very high market capitalization it is typical and expected that this key index would be included in many high-profile funds. This brings up a rather important point in that many retirement accounts are made up largely of mutual funds that are coupled to the FTSE. Large moves in the Footsie 100 Index can have lasting and profound effects on individual savers and those who depend on retirement accounts for meeting life’s financial obligations.

As is true with all investing, having a diverse and balanced investment strategy that includes the FTSE is usually the best approach to long-term financial security. The FTSE is like many other large financial indexes in that it exhibits cyclical fluctuations over a period of time that can be somewhat predictable. Knowing this basic truth should give those who invest in the FTSE index, as well as other stock indices, some level of relief. The idea is simple in that when a market, a stock, or an index trends downward then in time it will eventually trend upward once again.

As the financial world continues to become more global in nature, indices such as the FTSE will play a growing role in measuring the economic health of a country. It has been suggested by some that trading major indices like the FTSE is analogous to trading whole countries. This further adds to the complexity of financial products such as the FTSE index. Another factor that plays into major indices trading like the Footsie 100 Index is the impact that foreign-currency trading has on global markets in general.

The health of a country’s currency certainly comes in to play and becomes a major factor when talking about important indexes like the FTSE. Billions of dollars in various currencies are traded globally each and every day and are having a larger and larger impact on other financial products such as the FTSE. As global markets continue to evolve and change one thing is certain, and that is that no one can really predict how financial globalization will ultimately play out. The good news is that more countries are beginning to trade precious metals in exchange for commodities. This new way of doing business will ultimately have an impact on global markets as a whole.

It is obvious and clear that the FTSE index is a critical financial gauge that has a long and trusted history. The Footsie 100 Index will likely continue to shine among the greatest indices of all times, yet this index along with others must be flexible and be willing to change with changing economic conditions to endure and truly survive in the long run. The London Stock Exchange is arguably one of the greatest financial powerhouses on the planet, and the FTSE index is the true and undisputed lifeblood of this great powerhouse.

Penny stocks or “Micro-cap stocks” are a term used to label regular common stock that trades at five dollars or less. These five dollar stocks are traded OTC or (Over-the-Counter). They are not traded on the normal major markets such as the NYSE, AMEX, or NASDAQ. They are often found on the OTC bulletin board or among other services. The main benefit of Penny stocks for the average investor is the fact that they have a very low barrier of entry. Often these stocks are chosen by beginning investors as a practice ground before moving on to the major markets. Remember that even though this market has lower-cost they still have great potential for gains. You can double you money overnight. These stocks are a great way to hone your skills as a trader without putting a large amount of money on the line. You can actually be IN the markets developing real strategies rather than practicing on paper with no money on the line. Another benefit is the fact that Penny stocks are easy to buy and listed in each of the stock exchange markets readily available for the public to view. As I mentioned before, potential gains from these stocks can be tremendous by multiplying your money two or three times. This advantage usually cannot be found in the major stock markets. Just as with all other stocks, you should do your homework, beware of hype, conjecture, and analyze volatility.

Penny stocks are not without risk though. Some things to consider are the fact that some Penny stocks are not registered with the SEC. This is normally because it is a fledgling company just starting out. This means if you invest your money into one of these companies and the company violates some law or goes under, you could lose all your money. Basically Penny stocks can be largely unregulated which makes it a prime breeding ground for unethical activity. The next major pitfall is the lack of statistics and information. Penny stocks are either companies that are just starting out with no consistent history or they are companies that are on their way down, near the point of bankruptcy. Newer companies can be extremely volatile depending on the industry and management. One week the company might be doing extremely well and then the next struggling to stay afloat. Because of this penny stocks can be very unpredictable and risky for the average investor. One side note here, be careful of fellow investors trying to unload their many shares of Penny stocks or any other type of stock. E-mails that sound too good to be true usually are so please beware.

This market may be large enough to trade but liquidity can be your enemy or the lack thereof. There are times that once you have bought shares in a company, for some reason or another, you want to liquidate them ASAP. In the normal major markets this may not be a problem but for the penny stock market the lack of liquidity can be an extreme variable. Sometimes it may be difficult to liquidate your position when you decide to sell or get rid of your shares. If there is a quick turn against your investment you may not have any choice but to ride the trend all the way to the end of the line, no matter what the outcome. The wisdom it takes to navigate this type of variable is usually found in more experienced traders but the allure of quick money draws new and old traders alike. In fact all the pitfalls I’ve stated thus far relates to an environment geared toward an experienced investor and not for the average investor. But because of the low cost of these stocks, inexperienced traders flock to this market like flies to honey. Still if used carefully these stocks can be a great breeding ground for budding traders.

Beginning traders often make the same common mistakes. Avoiding the common mistakes can be your first step toward becoming a successful trader. One mistake is to blindly follow advice from an expert, newsletter, or website. No one has it 100%, 90%, or even 80% correct all the time. I doubt anyone can even consistently pull 50%, 40%, or 30% year in and year out. If you are serious about becoming a trader learn, study, practice and develop your own strategy. Another common rookie mistake is “jumping in” when it is unnecessary. The average trader may want to try out a new strategy without first doing their due diligence or testing. Usually they often feel that they have control over their system and are ready to push it to the limits. They go for the big bucks and end up taking a bath all because they had to be “In” the market. Making money in the markets can be highly addictive and with all addictions come an unbalancing of judgment. Using your gut, feeling lucky, or any phrases like these can kill your portfolio quickly. I have often heard that the best traders tend to be ex-military personnel. Why this may be the case is because military personnel train to follow discipline. Disciplining yourself and doing what needs to be done is the core of military training and curriculum. This training is an ideal way to approach trading the stock market or any other market for that matter. Following a set of rules and sticking to those rules within a structure, and adhering to discipline, is what makes some traders world renowned.

Overall Penny stocks can be a wild ride. If you can handle the ups and downs this may be a great investment of your time. They are an affordable investment with great upside potential. Technology can also be a great asset nowadays as the stockbroker goes the way of the dinosaur. More data is available now than ever before. Software used to create trading strategies is within the reach of most consumers. It doesn’t matter how old you are anyone willing to learn can excel and make money. Even if you are older you can learn and make money well into your retirement. The sooner you get started the sooner your investment will pay off.

Any potential investor willing to play the financial markets will always be faced with the dilemma of learning how to predict or read their target markets and consequently be in a position to be a smart investor. Predicting the FTSE is as tough as any other established market both for seasoned and new investors.

In general, predicting a financial or stock exchange market is known as charting though you will more often here it described as ‘technical analysis’. Simply put, this is the process of analyzing previous price trends for your preferred stock or commodity with the aim of anticipating its future price so as to determine whether its worthwhile to invest in it.

In most cases most financial market operators will trade their financial options premised on this technique. The key reason why most traders prefer using this method is because trends tend to repeat themselves after certain periods of time. This would perhaps present the most easy to understand guide for a new investor who is looking at playing the FTSE.

However, it is not uncommon to find investors or players who prefer a more traditional form of analysis that basically involves assessing the performance of a stock by how much revenue was generated against the operating costs and its consequent impact on the share price. That is to say that if huge profit margins were generated on a particular stock, then its share price is bound to rise and if there is a great likelihood of that trend continuing, then its worth investing in that particular stock.

Of course both of the approaches described above represent the basic approaches to technical analysis of financial tools. However, predicting any stock exchange market is often more complicated than that. A major market like the FTSE is often influenced by ‘outside’ forces that are often very difficult to predict. Major events especially in politics do influence the markets a great deal and it is always important to keep a close eye on those.

However, plenty of times, stock markets like the FTSE will witness spikes and falls based on the release of key economic figures. These figures are known to guide market sentiments. Market sentiments determine which way a market swings. If the figures released inspire a ‘feel good’ factor in the traders and market operators the markets swing upwards and prices shoot up. This might be a good time to cash in on any financial options held. But you need to be ahead of the curve and on the look out for the release of these figures to avoid being caught off guard. This could mean subscribing to dedicated financial markets literature and sites e.g sharecast.com

It is also important to pay attention to market analysts who are constantly making forecasts of where revenues and profits are expected to be in the future. Your choice of analysts to bank on is extremely important. They must have vast experience of playing big markets like the FTSE as well as an enviable record of success. This emphasizes the importance of research. Most successful analysts are quite visible on the financial market segments of leading News Stations like the BBC as well as online.

Now with this being a simple guide to predicting the FTSE, let us go back to the basics. It is often assumed that one needs financial markets training to venture into the stock markets whereas the truth is, what is really needed is a key interest in trading and a keen eye for trends. Following trends makes the most reliable and easy to understand strategy for predicting the markets.

The thing to note is that stock and share prices always move in a series of rises and falls. The overall direction of these rise and falls is what will constitute the trend of a share or stock. If you can keenly study the turning points (or peaks) of these rise and falls you will be in a great position to predict the future performances of that share or stock.

Simply put the turning point of a fall occurs when there is an increased trader or operator entry to trade in that particular stock or share because it is currently cheap. With increased demand the stock or share price will rise up to a point where just about every trader will want to sell and cash in on the higher price. This will naturally precipitate another fall and on and on it goes. With time this will then formulate a trend which if observed keenly can offer a fantastic and simple predictability tool.

For example, if you drew a simple chart and connected all the turning points at the price peaks as well as all the turning points at the price falls you would be in a position to predict future prices by simply extrapolating (extending) each of these lines. In order to ensure more accuracy, its important that both of these lines be lines of best fit i.e. that each of the lines tries to connect with as many turning points as possible. Inevitably, some of the turning points will fall outside either line.

Now in financial market lingo the turning points at the price peaks are commonly known as resistance levels while the turning points at the price falls are known as support levels. Traders and market operators refer to them as pivot points. Whenever a pivot point is reached as explained earlier, a market reversal occurs. A market reversal is simply the change in stock or share price, either upwards or downwards. This approach of determining pivot points and predicting price trends is mostly for the short term approach like between the opening and closing of the markets.

Of course to keep a trace of the performance of the prices means that you require to monitor changes very closely. Sites like Yahoo will provide you with FTSE price trends for free but you would be wise to use this with an automatic browser refresher to stay closely up to date. Consequently you could contact your broker or financial advisor for a reliable software.

It is important to note that this is just one of the simple strategies you can rely on and its only, for the most part, a starter. Getting hold of a great broker and financial advisor combined with discipline and research is necessary for success in predicting the FTSE. Happy trading.

What is the London Stock Exchange?

The London Stock Exchange is the largest stock exchange in Europe and the fourth largest stock in the world. Current data show that the London Stocks reached a net worth of approximately US$ 3.3 in December of last year. It is currently situated in London City, at the Paternoster Square near St. Paul’s Cathedral.

London Stock Exchange: The History

The London Stock Exchange was established in 1801. Before it was founded, stockbrokers used to meet in coffee houses because their rude behaviors got them banned from the Royal Exchange. Jonathan’s Coffee House and Garraway’s Coffee House are two notable coffee houses where public auctions were held. Trade details were published a few days of the week.

After the destruction of the Royal Exchange building in 1669, The Royal Exchange permitted brokers and even merchants traded in the newly built Exchange Building. This gave rise to an organized stock market. It was off to a rocky start but eventually became stable as the 19th century came in. The first official rule book was written in February 1812.

After the Seven-year war, the Exchange was faced with a booming economy. Foreign countries such as Chile, Peru and Brazil became a growing market for international lending. This made transactions with foreign parties available. The economic boom in London also positively affected the economy of other UK cities such as Liverpool and Manchester.

During the mid-1800s, the invention of telephones, ticker-tapes and telegraphs led to a revolution in the Exchange’s work. At first, traders were doubting the effectiveness of the telephone but later on they realized how useful it was in business. The telephone became an indispensable device to the Exchange.

At the outbreak of the First World War, The Stock Exchange ended up being closed from the end of July up to December of the same year. The Exchange was re-opened on January 4, 1915 under strict regulation. Thousands of members quit the Exchange from 1914-1918 due to the limitations and challenges brought about by the war. As peacetime returned in November 1918, the Exchange started to flourish again.

Based on their experience from the First World War, the Exchange made plans before the Second World War started. They initially planned to move to Denham, but this plan was deferred. The Stock Exchange remained closed only for a couple of days during World War 2. Most transactions were made through phones to reduce the number of injuries.

The post-war era brought a remarkable growth of the London Stock Exchange. In fact, the growth was so vast that a new building had to be built to accommodate the new companies. In November 8, 1972, Queen Elizabeth II opened the Stock Exchange Tower. The tower stood 321 feet and had 26 storeys. This era also abolished two trading prohibitions. The first allowed women and foreign brokers on the floor and the next brought the union of the London Stock Exchange with other British and Irish stock exchanges.

Other Milestones of the London Stock Exchange

February of 1984

The FTSE 100 Index, one of the most effective indices of all was started by the partnership of the Financial Times and the Stock Exchange. It tracked the development and movement of the 100 leading companies listed on the LSE.

1986

The prompt deregulation of financial markets in the UK was the biggest event in the 1980s. “Big Bang” was the term coined to describe this event. The deregulation included the distinction between a stockjobber and a stockbroker, and the abolition of the fixed charges on commissions. The LSE also shifted from the open-outcry method to a screen-based, electronic trading.

1995

The LSE launched the Alternative Investment Market (AIM), to allow small, growing companies to expand to markets abroad.

1997

The Electronic Trading Service (SETS) was started followed by the launching of the CREST Settlement Service.

2000

The LSE became a public limited company.

2004

The Stock Exchange House was moved to its current location.

2007

The LSE merged with Borsa Italiana, to create the London Stock Exchange Group or the LSEG.

FTSE 100 Index: An Overview

The FTSE 100 Index was launched on January 4, 1984. It started with a baseline of 1,000 and peaked to around 7,000 on December 30, 1999. It fell dramatically to 3,500 during the financial crisis between 2007 and 2010. The FTSE index is maintained by the FTSE Group. The group is an independent company co-owned by the London Stock Exchange and the Financial Times.

The Exchange houses some of the world’s largest and most well-established companies. More than 1,300 companies from 60 different nations experience the globally-respected and justified standards of the Exchange. The FTSE 100 Index, informally called “footsie”, is the main index share of the top 100 highly capitalized companies in the UK listed on the Main Market. FTSE is a name derived from the acronym of two companies, the Financial Times and the LSE. The group has been registered as a limited company with their own rights. The FTSE 100 Index is the most widely used stock indicator in the UK.

Trading starts at 8:00am and ends at 4:30pm and closing values are recorded at 4:35pm. The companies included with the index are determined quarterly. The companies must meet a number of strict requirements set by the FTSE Group. This includes having a full listing on the London Stock Exchange with a denomination of either Sterling or a Euro. Other requirements include tests on liquidity, nationality and free float factor. The Free Float Factor is the percentage of all available for trading shares issued. It is rounded up to the nearest 5% multiple for purposes of calculation. To compute the free float capitalization of a company, find the market cap first (share number x price of share) then multiply by the free-float factor. Restricted stocks are not included in the computation.

The Top Ten FTSE 100 Companies of the year 2011 are as follows: BHP Billiton with £148bn, Royal Dutch Shell with £135bn, HSBC Holdings with £118bn, Vodafone Group with £93bn, BP with £91bn, Rio Tinto with £86bn, GlaxoSmithKline with £61bn, Unilever with £56bn, British American Tobacco with £49bn and BG Group with £49bn.

Share prices are marked by total market capitalization, but of course, larger companies make more impact compared to smaller companies. This has always been a fact that can’t be denied ever since the start of the trading business.

Many global investors look at FTSE for building their investment portfolios. The FTSE Group is a high-profile independent financial organization that is a joint venture of the Financial Times and the London Stock Exchange, which are both reflected in the FTSE acronym. This England and Wales-based company calculates various indexes to reflect global markets, with one of the more famous indexes being the FTSE 100. Developing a diversified FTSE portfolio is key to being a successful global or U.K. investor.

The FTSE 100, also known widely as the Footsie, is an index of 100 big companies on the London Stock Exchange. These companies represent high market capitalization. Understanding a little history of the index could be valuable. The FTSE 100 started in 1984 at a base of 1000. Its overall peak of 6,950 occurred at the end of December 1999, while overall global markets thrived. The index plunged to a level of 3,500 in March 2009, following the meltdown of financial institutions and the real estate market. During the subsequent economic recovery the index climbed near 6,100 in February 2011. In the first half of 2012 the index was between 5,200 and 6,000.

FTSE indexes are used by investors for analysis, measurement, hedging, asset allocation and tracking of industries. The spectrum of companies and industries that FTSE covers includes 47 countries and over 7,400 stocks, which accounts for 98% of the investable global stock market. The FTSE All-World is the benchmark index used by international financial investors. Many exchanges throughout the world use FTSE to calculate indexes in their domestic markets. The FTSE Group creates several indexes for ETFs, funds and derivatives.

Portfolio diversification is a measure taken by investors to combat market volatility, which can be very disruptive to investors. The financial problems of Greece, for example, can quickly rock European markets, which can affect U.S. and global markets. Even though no financial expert can guarantee a bullet-proof hedge against market volatility, portfolio diversification is a safer bet than putting all your eggs in one basket.

Investing in 10-25 stocks from the FTSE 100 is one way of achieving diversity. Another way is simply investing in an index such as the FTSE 100. The reason for choosing 10-25 stocks from a list of blue chips is that no one really knows whether established stocks will go up or down over a certain time period, but if the overall market advances, it is likely that advancing stocks will offset decliners and that the overall result will yield a net gain. Even if the overall market goes down, there is still a chance that not all stocks will go down and that some winners will make up for other losses. The less stocks you concentrate your funds in, the more risk escalates.

How does an investor decide on stocks? Sector diversification is another factor. Picking stocks that all come from the same market sector can be high risk, just as balancing stocks on too much of an assortment of sectors can create static or adverse results. That’s why many investors have gravitated toward Exchange Traded Funds (ETFs) such as the FTSE 100. Investing in a group of ETFs relies on broad market moves, which can be less risky than relying on individual stock moves.

Beating the FTSE requires a combination of luck and skill and usually involves intense study of global markets, using a mix of long and short positions. Long positions are investments made with the expectation of equity growth while short positions are investments made with the expectation of decline in value. Mutual fund and hedge fund managers are known for mixing long and short positions. Investors who don’t understand short selling are highly advised by financial experts not to experiment with it, since shorting carries both extreme risks and extreme rewards.

FTSE portfolio managers who actively trade will analyze the relative strength of investments and rotate stocks in and out of a portfolio based on trends, using charts. Relative strength is a measurement of equity tops based on moving averages. Support levels are measures of low valuations based on recent equity history. This study is known as technical analysis, while the study of actual evaluations and company performance is known as fundamental analysis. Fund managers also rotate equities based on sector analysis, in which sectors are ranked by performance and stocks are selected from top sectors. These rankings are constantly changing, which is why they will regularly make rotations in the portfolio.

Although relative strength is constantly changing for every asset class, sector, fund and equity, as an example, the top ten relative strength performing sectors of the FTSE 350 in July 2012 were:

1. Software and Computer Services

2. Beverages

3. Fixed Line Telecommunications

4. Health Care Equipment and Services

5. Non-Life Insurance

6. Tobacco

7. Food Producers and Processors

8. Travel and Leisure

9. Mobile Telecommunications

10 Aerospace/Defense

SOURCE: Levy, listed on Relative-Strength.com

For July 2012 this list of sectors formed the basis of a low risk portfolio, but that doesn’t mean it will always be low risk. These sectors were ranked based on relative strength, meaning they performed at above average levels compared to earlier recent months. Many times, high relative strength can indicate market tops, but continued strength in beating averages and former tops can signal bull markets. It takes careful analysis and a certain degree of luck to make correct calls.

Just a few months earlier, the relative strength rankings were much different as Gas, Water & Multi Utilities ranked number one, but by July ranked number 15. Conversely, the Software and Computer sector only ranked number 22 in May but by July was number one. That’s why professionals rotate assets, because if they don’t a portfolio can wildly fluctuate in the short run. Serious investors tend to pay attention to their portfolios, but don’t necessarily react to daily fluctuations.

Stocks comprising the FTSE 100 are weighted based on market capitalization, which is the total value of all shares, a number that changes every market session. This market fluctuation usually doesn’t affect big changing in rankings of the stocks on a daily basis, but rankings do change over time. In 2012 the top weighted stocks by market capitalization on the Footsie include HSBC Holdings, Vodafone, BP, Royal Dutch Shell and GSK. It’s advantageous to study these evaluations, but it’s also important to limit risk by not investing too much in one sector. The key to FTSE portfolio strength is a combination of strong asset performance history and diversified selection of assets.

The Financial Times Stock Exchange (FTSE) 100 index is also known as the FTSE 100.

It can also be called footsie; but this is informal. It can be defined as the share index of stocks of top 100 highest market capitalized companies that are listed in the London Stock Exchange (LSE). It is also considered as one of the widely used stock indices in the world. It is an indicator of performance of businesses or companies listed in it.

The share indices of these highly capitalized companies can be shown in real time in live charts commonly known as the FTSE live charts. These share indices are calculated in real time and updated after every 15 seconds on the live charts. The indices are normally maintained by the FTSE group. The FTSE group is a company that is co-owned by London Stock Exchange and the Financial Times. The company has drawn its name from Financial Times and London Stock Exchange. It is important to note that even though the FTSE group has drawn its name from the two companies and it’s owned by them, it’s a limited company.

History and development of the FTSE Share Index

The FTSE 100 share index was started in January 1984 with a base level of about 1000. The highest base level ever reached was 6950.6, and it was reached in December 1999. The index fell in 2007-2010 due to financial crisis to a value less than 3500 in March 2009. The share index has since recovered to significant level. For example it was about 6,091.33 in 2011; in the month of February.

Other Forms of the FTSE share indices

Other FTSE share indices include: FTSE 250, FTSE 350, FTSE Fledgling, and the FTSE small Cap. It is important to note that FTSE 100 listed companies account for about 81% of the capitalization market of the London Stock Exchange. It is also known that FTSE 100 share index is the most widely used market indicator in UK. The FTSE All-Share index includes: FTSE SmallCap, FTSE 250, FTSE 350 and FTSE 100. The FTSE 250 aggregates the 250 largest companies after the 100 most capitalized companies, while the FTSE 350 combines both the 100 highly capitalized companies and 250 companies after these companies.

Requirements for a company to be listed in the FTSE share index

For a company to be listed in the FTSE it must meet certain set minimum requirements. One such requirement is that the company must be listed in full in the London Stock Exchange. In this case the company’s stock prices (in Euro or sterling pound) must dominate the Stock Exchange Electronic Trading Service. Other requirements include meeting certain set standards of free float, liquidity and nationality.

The companies that are listed the in various categories of the share indices are normally updated once every three months. For example, the top listed companies in the FTSE 250 are promoted to the FTSE 100 if their capitalization can place them in the top 90 most highly capitalized companies.

It is important to note that trading in the stock indices starts at 8:00 am and ends at 4:30pm. It is at 4:30pm that the closing auction is started.

How is the Index level determined in the FTSE?

The share index level is normally determined by weighting. The weighting in normally done by capitalization of the market. This is done to make sure that there is difference in share index between larger companies and smaller companies.

This formula is used for calculating both share indices that are weighted by capitalization and any other share index.

The factor of adjusting free float is taken as the percentage of all shares issued that are present for trading. After calculating the factor using the formula, it is always rounded up to nearest value of 5% multiples. The numerator of the formula represents the free float capitalization of the concerned company. That is to say that; free float is equal to the market capitalization multiplied by the calculated free float factor. It is therefore, true to say that free float in itself does not include stocks that are restricted. Examples of stocks that are restricted are those stocks that are held by insiders of the company.

Companies currently listed in the FTSE 100 share index

The companies that are currently listed in the FTSE 100 share index are, among others: Centres Group, Prudential, Aggreko, Kazakhmys, Carnival, Antofagasta, G4S, Imperial Tobacco, Associated, Capita Group, Aviva, Experian, BAE Systems, Unilever, RSA Insurance Group, BP, Old Mutual, Kingfisher, Shire, Aberdeen Asset Management, Next, Standard Chartered Bank, Polymetal International, Bunzl, HSBC, Rexam, J Sainsbury, Wolseley, Capital Shopping, Anglo American, Centrica, Hargreaves Lansdown, Scottish and Southern Energy, Intertek Group, Burberry Group, Evraz, British Foods, ITV, ARM Holdings, GKN, International Power, Lloyds Banking Group, Tullow Oil, Hammerson, Tate and Lyle, GlaxoSmithKline, Smiths Group, Weir Group, Ashmore Group, and International Consolidated Airlines Group. Other companies include: Intercontinental Hotels Group, SABMiller, Diageo, Xstrata, Johnson Matthey, AMEC, Babcock International, Resolution, Vedanta Resources, BT Group, Glencore International, Marks & Spencer, Royal Dutch Shell, Barclays, The National Grid, British American Tobacco, Reed Elsevier, Reckitt, British Sky Broadcasting Group, ICAP, Randgold Resources, Petrofac Benckiser, Serco Group, Land Securities Group, CRH, Rio Tinto Group, WPP Group, Royal Bank of Scotland Group, Whitbread, Meggitt, Admiral Group, Sage Group, AstraZeneca, Schroders, Croda International, Pearson, Severn Trent, Wm Morrison Supermarkets, Smith and Nephew, IMI, British Land Company, Standard Life, Compass Group, Tesco, Eurasian Natural Resources Corporation, Fresnillo, United Utilities, Legal and Genera, Vodafone, Rolls-Royce Group, and BG Group.

Amongst the above listed FTSE 100 companies the top four listed as per 9th March, 2011 are as follows. The First Company in this list is BHP Billiton which is in the mining sector. It had a market capitalization of £148 billion. The second in the list is Royal Dutch Shell with market capitalization of £135 billion. The third in the list is HSBC with market capitalization of £118 billion. The fourth most listed company in terms of market capitalization is Vodafone group.

The Financial Times Stock Exchange (FTSE) 100 index is the indicator of market performance. It shows the performance of share indices of listed companies in real time using the FTSE live charts, among others.

As an investor in foreign exchange, you would always want to gain better profits and the maximum returns from your investment. There are various Forex strategies you can actually adapt and apply to all your currency trading transactions. FTSE fully understands the goals of each investor and that has led them into developing various FTSE investment strategy indices that are aimed to bring in more cash flow and returns.

FTSE 100 Equally Weighted Index

This investment strategy index is considered somehow similar to the 100 Index of FTSE and this is designed to have the same constituents as the latter. A 1% weight is provided to each company using this index.

FTSE 100 Minimum Variance Index

This investment strategy index aims to control the FTSE 100 Index volatility until it is minimized. It makes its basis in the history of returns and uses it to avoid any risks and improve the potential of the investment in the index trade-off. The index is fully diversified and easy to invest at with an ICB Industry individual weight of less than 20% and single stock weight of less than 4.5%.

FTSE 100 Risk Target Excess Return Index Series

This strategy index based its principles on the framework founded on rules set to compare the cash over the return of the investment strategy. This allows investor’s exposure to the FTSE 100 Total Return (TR) Index with volatility. It uses practical properties of the statistics of volatility. It is also designed so that the equity investors will be allowed access to various levels of FTSE 100 TR. It offers 5, 10 and 15 percent of volatility exposure.

FTSE Short & Leveraged Indices

This type of investment strategy index is being offered on the various indices such as the FTSE 250, FTSE 100, and FTSE MIB RT. The short and leveraged indices make it possible for the UK market volatility to be exploited by money managers. These indices account for the financial cost of leverage positions and interest income element and geared returns of the short positions.

FTSE ActiveBeta Index Series

This strategy index is somehow linked to the Westpeak Global Advisors and it works through the combination of momentum and value concepts which is also utilized in active management. The active equity returns have systematic sources and this allows investors to use either alone or together. FTSE All-World Index Series is used by this investment strategy index which makes it the choice of most investors around the world.

FTSE Diversification Based Investing Index Series

This type of investment strategy index is being created to go along with the QS Investors, LLC. This is made for the purpose of providing protection (bear market) in relation to the weighted benchmark market capitalization. It is designed to benefit from the behavioral and macro inefficiencies of the market equity. What it does is that it develops macro risk factor exposure. This investment strategy index does not focus mainly on the stock selection but rather on the construction of the portfolio. The choice of international investors, the FTSE All-World Index Series, is also being used by this strategy index.

FTSE EDHEC-Risk Efficient Index Series

This series of investment strategy index is designed to go along with the EDHEC-Risk Institute mainly for the purpose of capturing the market return equity as well as to increase the efficiency of risk vs. reward. In order to reach the highest possible efficiency, the constituent’s portfolio is weighted through Sharpe ratio maximization. The constituent securities are the basis of this index series and are effective for much broader index.

FTSE EPFR EM Fund Flows Index

This investment strategy index was created to go along with the EPFR Global and this is somehow similar to the FTSE Emerging Index but with added features. It is adjusted to keep track of the exposure of the institutional investors to the Forex market. If investors wanted an enhanced performance of their portfolio, this can be a great tool. The specific markets are weighted to the optimum.

FTSE GWA Index Series

Associated with the Global Wealth Allocation Limited, this investment strategy index is designed to learn about the wealth creation of the company related to its book value as well as cash flow. The methodology used by the GWA involves financial statements auditing in order to come up with the three factors of wealth namely: net profit, book value and then cash flow. The weight of the wealth of the investors does not include the prices. Thus, the market bubbles do not mainly affect the index constituent weight.

FTSE RAFI Index Series

Research Affiliates is the partner chosen by FTSE to be able to come up with this investment strategy index. This is an innovation which aims to select index constituents and weigh them according to the following factors: value of book equity, total sales, the free cash flow and the total cash dividends.

FTSE StableRisk Index Series

This is another series of investment strategy index by FTSE which is created to go along with the AlphaSimplex Group, LLC. This is a series of multi -asset indices which are risk controlled for the purpose of using less short term level extreme shifts in order to have the expected returns in the longer term. The series of indices is designed so that the commodities, assets, interest rates and currencies are exposed. Each asset class has a different calculated index. It is also used to rebalance the portfolio each day so that the volatility of it is maintained.

FTSE TOBAM Maximum Diversification Index Series

This investment strategy index is launched to be associated with TOBAM. The diversification ratio, is designed so that it will allow investors to have the most diversified trading portfolio for whatever stocks are given. So that the risk contribution of the different risk factor is weighted equally, rather than based on market capitalization, the index constituents are weighted.

The FTSE investment strategy indices are all created with the assurance that investors can easily invest in these different indices without the difficulty of tracking the investments. They are all designed to meet the criteria and standards set by the FTSE.

The FTSE 100 index, informally known as the footsie index, is the UK’s most recognized and widely used stock index and is often referenced as a measuring stick for general business and financial prosperity.

The FTSE 100 is a shares index that represents stocks in the one hundred blue chip companies that have the largest market capitalization in UK stock market listings.

It first began in 1984 and is managed by a company known as the FTSE Group which is an independent company that is owned jointly by London’s Stock Exchange and the Financial Times which is also where it gets it’s name; FTSE being an acronym for Financial Times and Stock Exchange.

Even though it is not as comprehensive as some other indices such as the FTSE All-Share the FTSE 100 is considered the standard stock market indicator in the UK. Over 80% of the entire market capitalization value of London’s Stock Exchange and over 7.8% of the world’s market capitalization is represented by the companies of the FTSE 100.

So what changes should you look for when assessing which companies will be included in the FTSE 100 and which ones will be removed?

There is more than one way that the FTSE 100 list can be changed. Generally companies will be added or removed during one of the quarterly review meetings of the committee that oversees the various FTSE indices.

There are a number of things that the committee considers before including a company in the index.

The companies listed in the FTSE 100 must pass a number of tests for liquidity, the public float and nationality. A company must also be fully listed on the LSE and be listed on the Stock Exchange’s electronic trading service also with a Pound Sterling denominated price or a Euro denominated price.

Only companies that reach a market value of 90th or above are promoted to the FTSE 100 and a company already within the index that falls to a market value of 111th position or lower is removed.

Of course there must only be 100 companies in the index so when there are more companies to be promoted than there are to be removed the bottom ranking companies will be deleted and likewise when there are more companies to be removed than there are to be promoted then the highest ranking companies that are not already in the index will be promoted.

Just in case a company must be deleted from the index before one of the quarterly reviews there is a reserve list made up of the six highest ranking companies that are not currently in the index.

One more way that a company can be listed in the FTSE 100 is known as “fast entry”. This is when a company is newly listed and it’s market capitalization accounts for more than 1% of another index called the FTSE All-Share. If this happens the newly listed company will be added to the index at the close of business on its first day of trading and the lowest ranking company on the index will be removed.

When calculating a company’s market capitalization the review committee will use only the quoted eligible equity. When a company has a second line of equity that is significant then it is included in the calculation based on its market price.

The committee will sometimes price a second line of equity separately if it accounts for more than 25% of the company’s full market capitalization and if this falls below 20% it will be deleted from the index although this doesn’t happen very often.

Loan stocks and preference shares are not included in the calculation until they are converted.

If the call dates for nil paid or partly issued shares are known then these are also included in the calculation as they are a reflection of the total shares at issue.

When there is a merger between two companies currently in the index then the former appropriated company is removed from the index and a company from the reserve list is promoted into the index to make up the 100 companies required. If an indexed company is merged with a non indexed company then the new entity is eligible to be promoted to the index if it ranks higher than a company on the reserve list otherwise the space will be filled by one of the highest ranked companies on the reserve list.

Also when a company in the index splits, the two new entities are eligible to remain within the index provided they rank sufficiently otherwise their spaces will be filled by reserve list companies once again.

The FTSE 100 is not the only index that the FTSE group manages. There is also the FTSE 250 which is simply the next 250 companies ranked after the FTSE 100. These two indices combined are known as the FTSE 350. Then there is the FTSE small caps which is all the companies which don’t make it into the FTSE 350 and finally the FTSE All-Share which is all of the previous indices combined.

Since it’s beginning the FTSE 100 index has seen its fair share of mergers, acquisitions and take over’s and there is currently only 21 of its original indexed companies still listed.

The index is currently published every fifteen seconds while it is actually calculated on a real time basis between market open and market close or from 8am to 4.30pm each weekday. The figure that you see on the evening news is the value of the index at close of business for that day.

Most people in the UK are affected by the FTSE 100 index even if they are not investors themselves. For instance for pension fund holders the performance of the index will effect the return they receive since most pension funds are invested in UK equities.

The FTSE 100 can also rise or fall depending on events overseas making it a pretty good indicator of international economic movements. For instance when the markets fell in China recently the FTSE 100 saw a significant dip that reflected this.

The index has grown significantly over the last 28 years. When it first opened the total market capitalization of its listed companies was around 100 billion pounds. Today it is over 1.6 trillion pounds more than 15 times its original value.

The FTSE 100 is an index that is weighted based on market capitalization of blue chip companies. This index is developed mainly to measure the performance of top 100 best performing companies whose shares are traded on the LSE (London Stock Exchange). Market capitalization can be defined as the total value of shares (shares that can be traded) of a company whose shares are traded publicly. FTSE 100 companies must undergo a through screening to determine whether they have met the set minimum standards of liquidity and size. All constituents of FTSE 100 (also known FTSE 100 companies) have their shares also traded in the LSE (London Stock Exchange).

History of FTSE 100 Companies

The FTSE 100 index was launched in January 1984. Among the 100 companies that were listed in the initial FTSE 100 are: United Biscuits, Boots, British Home Stores and Trusthouse Forte. Only 30 of the original FSTE 100 companies are still in the FTSE 100 index today. 10 years ago basic commodities accounted for only 1.1% of all the FTSE 100 index with oil accounting for about 18.4% of the share index.

FTSE 100 index today

In the past few years there has been a global boom in business. For example, demands of various products and services offered by different companies have gone up drastically. This boom has led to an increase in the value of current companies. It is estimated that as at May 31st 2011 the basic commodities and oil and gas contributed to 14.3% and 19.5% of the index.

The FTSE 100 index represents about 80% of the stock market in United Kingdom. It is mainly used as the benchmark for investment. The FTSE 100 index is run by the FTSE group which is a limited independent company that is co-owned by the London Stock Exchange and the Financial Times.

Of the global stock market capitalization, the FTSE 100 Index contributes to about 8.97 % of the share indices. This is according to FTSE All-World Index companies, and it was recorded on 31st December 2008.

Running of the FTSE 100

The FTSE 100 index is run by following a set of rules. The running of the FTSE is normally overseen by a committee that is independent, and composed of leading market experts. The committee is given the responsibility of making sure that rules and regulations set for the index are followed and adhered to. The committee also carries out reviews of the index so as to maintain accuracy and continuity in the share market. The index is normally calculated and updated in real-time after every 15 seconds.

Conditions that companies must meet in order to remain in or join the FTSE 100 companies.

The FTSE 100 companies must meet and maintain certain minimum requirements. It is estimated that only 30 companies, out of the100 companies that were present when the FTSE 100 share index was launched, have maintained these set minimum requirements, and hence still remain in FTSE 100 index today.

One such a requirement is that the company must maintain its listing in the London Stock Exchange. Companies that wish to join the FTSE 100 companies must also meet the above requirement. This requirement maintains that the domination in the Stock Exchange Electronic Trading Service of share prices of companies in FTSE 100 index is mandatory. The companies must also meet minimum set standards of liquidity, nationality and free float.

The list of FTSE 100 companies is normally updated once in every 3 months. This process involves the promotion of companies in the FTSE 250 to the FTSE 100. The companies are only promoted if their market capitalization is among the top 90 of the FTSE 100 companies.

The companies that are listed the in various categories of the share indices are normally updated once after every three months. For example, the top listed companies in the FTSE 250 are promoted to FTSE 100 if their capitalization can place them in the top 90 most highly capitalized companies.

The future of FTSE 100 companies

The demands of various products and services offered by different companies will continue to go up, and this will increase the profitability of companies listed in the FTSE 100 index. Other companies that are not currently listed in the index will also meet the minimum set standards and get promoted to the join the FTSE 100 companies. The companies currently listed in the FTSE 100 index that do not perform will have to be demoted to a less competitive share index. This can be proved by noting that only 30% of the companies that were in FTSE 100 when the index was launched currently exist in FTSE 100 share index.

It is also estimated that the FTSE 100 may rise in the future since investors that have large amounts of money may invest in this particular share market.

Top 10 companies in the FTSE 100 index.

As per March 9th 2011, the top 10 companies in the list of FTSE 100 companies according market capitalization are: number one in the list is BHP Billiton which has a market capitalization of £148 billion. The second in the list has a market capitalization of £135 billion, and it is Royal Dutch Shell Company limited. The third is HSBC; the company has a market capitalization of £118 billion. The fourth most highly capitalized company as per march 2011 is Vodafone Group with a market capitalization of about £93 billion. The fifth in this list is BP which has a market capitalization of £91 billion. The sixth most highly capitalized company among the FTSE 100 companies is Rio Tinto Group which has a market capitalization of £86 billion. The seventh is the GlaxoSmithKline with a market capitalization of £61 billion. The eighth biggest company in terms of market capitalization is Unilever with a market capitalization of £ 56 billion. The ninth biggest company in terms market capitalization is British American Tobacco, and has a market capitalization of £ 49 billion. The tenth is BG Group; this company too has a market capitalization of £ 49 billion.

Companies that are already in the FTSE 100 index must maintain the minimum requirements in order to remain in the FTSE 100 index, otherwise, they risk being replaced with other competing companies from lower indices. Companies that have not yet been listed among the FTSE 100 companies must also strive so as to get promotion into this highly capitalized index.

INITIALS

EMA: Exponential Moving Average

SMA: Simple Moving Average

PIPS: Percentage in Point

DI: Definition