How to trade the FTSE 100 (UK100): composition, the pound, hours and risk

Trading UK100 means trading a CFD on the FTSE 100, the index of the 100 largest companies listed on the main market of the London Stock Exchange. It is weighted by market value and dominated by large international companies in energy, mining, banking, pharmaceuticals and consumer goods, many of which earn most of their money outside the UK. That makes it behave less like a measure of the British economy and more like a basket of global businesses priced in pounds, which is why it often rises when sterling falls.

This page covers the index and what drives it. For the full method for sizing UK100 and the other main index CFDs, see index CFD position sizing; only a short example is included here.

What the FTSE 100 is

The FTSE 100 was launched on 3 January 1984 with a base level of 1,000. It is calculated by FTSE Russell, part of the London Stock Exchange Group. CFD providers usually call it UK100, sometimes UK 100 or FTSE. It is often nicknamed "the Footsie".

Membership is based on size. The eligible companies on the London main market are ranked by market capitalisation, and the index is reviewed every quarter, in March, June, September and December. To reduce constant swapping of companies near the boundary, the rules use a buffer: a company that rises to 90th place or higher is added, and a member that falls to 111th place or lower is removed. The number of members stays at 100.

Weights are by free-float market capitalisation, so the largest companies have the greatest effect. Index funds that track the FTSE 100 buy and sell around quarterly reviews, which can move the shares involved. Our guide to index rebalancing explains those flows, and what a stock index is covers the basics of weighting.

What it holds

The FTSE 100 has a very different sector mix from the US indices. Its heaviest weights have typically been in:

• Energy, with large oil and gas producers.
• Mining, with diversified miners whose earnings depend on metal prices and demand from China.
• Banks and insurers.
• Pharmaceuticals.
• Consumer staples, including drinks, tobacco and household products.

It also holds large industrial, utility, telecoms, consumer and financial data companies, but very little in the way of large technology firms. As a result, the FTSE 100 can move quite differently from the Nasdaq 100 or S&P 500. In a strong period for global technology shares it can lag; when commodity prices rise or investors favour defensive, dividend-paying companies, it can do relatively well.

The FTSE 100 and the UK economy

Because many members are multinationals, a large share of their revenue is earned abroad. Domestic UK news, such as UK GDP or retail sales, often moves the FTSE 100 less than you might expect. The FTSE 250, the next 250 companies by size, has a higher proportion of UK-focused businesses and is usually considered a better gauge of the domestic economy.

The pound and the FTSE

The best-known feature of the FTSE 100 is its tendency to move against sterling. The reason is translation: companies that earn in dollars, euros or other currencies report and are valued in pounds, and their shares trade in pounds.

Worked example: overseas earnings and the exchange rate

Illustrative numbers only. A FTSE 100 company earns 1 billion dollars a year.

• With GBP/USD at 1.30, those earnings are worth 1,000,000,000 ÷ 1.30 = about 769 million pounds.
• If the pound falls to 1.20, the same earnings are worth 1,000,000,000 ÷ 1.20 = about 833 million pounds.

Nothing changed in the business, yet its earnings in pounds rose by about 8.3%. Investors may value the shares higher in pounds as a result, and if many members are in the same position, the index can rise. The reverse applies when sterling strengthens.

A well-known example came after the EU referendum on 23 June 2016. The pound fell sharply, while the FTSE 100, after an initial drop, recovered quickly in sterling terms, helped in part by the boost to overseas earnings. In dollar terms, the picture was much weaker.

This relationship is a tendency, not a rule. When the pound falls because of a global sell-off in risky assets, the FTSE 100 can fall at the same time. Our GBP/USD profile explains what drives the pound.

Index in pounds, account in another currency

UK100 is priced in sterling. If your account is in dollars or euros, two things move your result: the index and the exchange rate. Illustrative numbers only: if the FTSE 100 rises 2% while the pound falls 3% against the dollar, a dollar-based investor holding the index would be down about 1.1% overall (1.02 × 0.97 = 0.9894). On a UK100 CFD you only have currency exposure on your running profit or loss and margin, not the full notional value, but your value per point in dollars still changes with GBP/USD.

What else moves UK100

• Commodity prices. Oil and metals feed directly into the energy and mining heavyweights. Our guides to oil trading and gold and silver cover those markets.
• China and global growth, through miners, luxury and consumer companies.
• The Bank of England. Rate decisions affect banks' lending margins, the pound and the valuation of dividend-paying shares. See central banks and interest rates.
• Bond yields. Changes in gilt yields can affect banks, insurers and defensive shares in different directions. See bonds and yields explained.
• Wall Street. US data and the US open at 14:30 UK time regularly change the direction of the London afternoon.
• Ex-dividend days. Because the index has a relatively high dividend yield and many companies go ex-dividend on the same days, the index level can drop slightly on those dates for reasons that have nothing to do with sentiment.

When UK100 trades

The London cash session

FTSE 100 shares trade on the London Stock Exchange's order book. The day runs roughly as follows (UK time):

• 07:50 to 08:00. Opening auction: orders are entered and matched to set the opening price.
• 08:00 to 16:30. Continuous trading.
• 16:30 to 16:35. Closing auction, which sets the official closing prices used by index funds and for many valuations.

There is also a short intraday auction around midday. UK times follow British Summer Time, so the session stays at 08:00 to 16:30 local time all year. Key moments include the open, UK data at 07:00 (before the open), the US data window at 13:30 (08:30 New York, most of the year) and the US cash open at 14:30. The market hours tool converts these into your time zone.

Outside the cash session

FTSE 100 futures trade for much longer hours than the cash market, and most providers quote UK100 from early morning to late evening on that basis, with exact hours set by each provider. Outside 08:00 to 16:30 the price comes from futures, liquidity is thinner and spreads are usually wider. Bank holidays such as Good Friday, Easter Monday, the early May and late May bank holidays, the August bank holiday, Christmas Day and Boxing Day close the London market; your provider will publish its UK100 holiday hours.

How UK100 CFDs work

• Points. UK100 moves in index points, usually quoted to one or two decimals.
• Value per point per lot. Set by the broker and denominated in pounds. Contracts of 1 pound and 10 pounds per point per lot are both common, among others.
• Cash or futures-based. Cash contracts have nightly financing, based on a sterling interest rate benchmark plus or minus the provider's charge. Futures-based contracts expire quarterly and build financing into the price. See trading index CFDs.
• Dividend adjustments. Because the FTSE 100 is a price index, long cash positions are credited and short positions debited when members go ex-dividend. UK ex-dividend dates usually fall on Thursdays, so adjustments tend to bunch on those days. See dividends and corporate actions.
• Leverage. The FTSE 100 is one of ESMA's major indices: EU retail clients can be offered up to 20:1. UK retail clients are covered by equivalent FCA rules.

UK residents can also trade the FTSE 100 by spread betting, which works similarly to a CFD but is structured as a bet in pounds per point. Tax treatment depends on individual circumstances and can change, so check it rather than assuming.

A short sizing example

Illustrative numbers only. Your account is in pounds: 8,000 pounds, risk 1% = 80 pounds. UK100 is at 8,300 and your stop is 40 points away. The contract is 1 pound per point per lot with a 0.01 lot step.

• Lots = 80 ÷ (40 × 1) = 2.00 lots.
• Money at risk = 40 × 1 × 2.00 = 80 pounds.
• Notional value = 8,300 × 1 × 2.00 = 16,600 pounds.
• Margin at 5% = 830 pounds.

In a dollar account with 10,000 dollars, risking 100 dollars, with GBP/USD at 1.3000 (illustrative), 1 pound per point is worth 1.30 dollars: lots = 100 ÷ (40 × 1.30) = 1.923, rounded down to 1.92, risking 99.84 dollars. Use the position size calculator and the margin calculator with your own provider's figures.

FTSE 100 compared with other indices

• FTSE 250. The next 250 companies by size. More exposed to UK consumers, property, domestic banks and services, so more sensitive to UK economic news and UK interest rates. Some providers offer a CFD on it, usually at lower leverage because it is not on ESMA's list of major indices.
• S&P 500 and Nasdaq 100. Much heavier in technology. Periods when US technology leads tend to see the FTSE 100 lag in comparison, and the reverse in periods favouring commodities or defensive shares.
• DAX. Also export-heavy, but more industrial, priced in euros and calculated as a total return index.
• In dollar terms. International investors often look at the FTSE 100 converted into dollars. The difference between the sterling and dollar versions is the currency move.

A pre-trade checklist for UK100

1. Check the calendar for Bank of England decisions, UK inflation and labour data, and the US releases at 13:30 UK time. Our guide to using an economic calendar explains how.
2. Look at the pound and commodities. Note how GBP/USD, oil and metal prices are moving before you take a view on the index.
3. Check the ex-dividend calendar. On heavy ex-dividend Thursdays, a cash CFD will show adjustments, and the opening level may look weak for purely mechanical reasons.
4. Measure the range. Use the recent daily ATR to place a stop outside normal movement, and size down if it needs to be wide.
5. Confirm the contract value per point, lot step, hours and whether it is cash or futures-based.
6. Know which session you are in. Before 08:00 and after 16:30 UK time, liquidity is thinner and spreads usually wider.

Recording these checks in a trading journal makes it easier to see later whether a losing trade came from the idea or from the execution.

Common mistakes with UK100

• Assuming bad UK news means a falling FTSE 100. If the news weakens the pound, the index can rise. Think about the currency effect as well as the headline.
• Reading the FTSE 100 as the UK economy. The FTSE 250 is more domestically focused.
• Being surprised by ex-dividend drops. On heavy ex-dividend Thursdays the index can open lower for mechanical reasons. On a cash CFD the adjustment offsets this for long positions; on a futures-based CFD it is already priced in.
• Ignoring commodities. A sharp move in oil or metal prices can move the index through its heavyweights.
• Trading before 08:00 as if it were the cash session. Early quotes come from futures, with thinner liquidity and wider spreads.
• Over-leveraging. A 5% move against a 20:1 position wipes out its margin. Most retail CFD accounts lose money; read why most retail CFD traders lose and our guide to gap risk and weekend risk.

Frequently asked questions

Why does the FTSE 100 often rise when the pound falls?

Because many FTSE 100 companies earn much of their revenue in other currencies. When the pound weakens, those foreign earnings are worth more in pounds, which can lift share prices quoted in sterling. The relationship is common but not reliable: in a global sell-off, both can fall together.

What are the FTSE 100 trading hours?

The London Stock Exchange's continuous trading session runs from 08:00 to 16:30 UK time, with an opening auction from 07:50 and a closing auction from 16:30 to 16:35. Most providers quote UK100 CFDs for much longer, using FTSE 100 futures, but liquidity and spreads are best during the cash session.

How often do FTSE 100 members change?

The index is reviewed quarterly, in March, June, September and December. A company is added if it rises to 90th place or higher by market value and removed if it falls to 111th or lower, which keeps changes to companies that have clearly moved in or out of the top 100.

Is the FTSE 100 a total return index?

No, the headline FTSE 100 is a price index, so its level falls slightly when members go ex-dividend. FTSE Russell also publishes a total return version. The DAX, by contrast, is a total return index by default; see our DAX guide.

Is the FTSE 100 less volatile than US indices?

It has often been less volatile than the Nasdaq 100, partly because of its weighting towards defensive sectors such as consumer staples and pharmaceuticals, but commodity-heavy members can make it swing sharply when oil or metals move. Volatility changes over time, so use a recent measure such as the daily ATR rather than a rule of thumb.

Can I trade the FTSE 100 outside UK hours?

Yes, most providers quote UK100 from early morning to late evening UK time using futures prices, but spreads are usually wider and liquidity thinner outside 08:00 to 16:30. The index itself is only calculated from live share prices during the London session.