Trading FTSE 100 shares
The FTSE 100 is an index comprising the largest companies
based in the UK. The components of this index are some of the
most popularly traded and liquid shares in the world and so
for new traders they represent the best place to start. Some
stockbrokers will offer a reduced dealing cost for clients wishing
to trade FTSE100 shares simply because they are the easiest to
trade.
Technical and Fundamental Analysis
Stock traders tend to be followers of fundamental rather than
technical analysis although there are an increasing number of
chartists who have turned their attention to trading individual
stocks. The main problem with using technical analysis for stock
trading is that you often find large gaps in the charts where share
prices have a closing price from the previous day that is markedly
different from the next day's opening price. This is because stock
markets do not offer 24 hour trading and so announcements from
companies before or after the trading bell can result in
considerable price changes once the stock re-opens for trading.
Stocks in the FTSE100 are less likely to have the extreme
movements that some of the smaller cap shares may experience when
news is announced and so if you are thinking of using technical
analysis to trade shares try and stick to those that have the best
levels of liquidity.
If you are keen to learn more about how to use both technical
and fundamental analysis there are a number of excellent training
courses that are provided by various education companies around the
country. As with choosing your stock broker it is important to read
more about the courses on offer to ensure you find the right one,
at the right price, that is going to teach you at your pace and not
become too advanced too quickly. One of the greatest mistakes made
by new traders is trying to understand every aspect of trading
rather than focusing on the basics and ensuring a full
understanding of them before moving on to other more complex
strategies.
Tip: Don't be tempted by get rich adverts
offering the answers to the stock market. These courses tend to be
expensive and you won't learn any more than if you spent time
reading a few quality books or attending a more reputable
educational course.
Trading FTSE 250 and Small Cap Shares
Trading on smaller shares can be very profitable as they tend to
have more extreme movements when news or trading updates are
released. Much of the reason for the increased volatility is due to
the reduced liquidity; these shares aren't as actively traded as
those in the FTSE100.
Obviously the potential upside makes them of huge appeal to
investors but it is worth remembering that with the possible upside
gains comes an increased risk of losses.
Advisory and Discretionary Trading
If these smaller shares are of interest to you it is worth
considering asking your broker about an advisory or discretionary
service. Information about the FTSE100 group of companies is always
easy to find but for some of the smaller stocks it can be difficult
to obtain quite as much information to base you key trading
decisions. This is where your stockbroker may be able to assist you
and will often have access to broker notes or
research that is not readily available to the general trading
community.
Tip: The costs to use an advisory or
discretionary service are likely to be considerably higher than an
execution only account. Take time to research the broker you are
intending to use and get to know the sales traders at the company.
Building a good relationship with them at an early stage can pay
dividends in the future.
Further resources on Share trading
Comparing brokers
Our comparison table below looks at a few of the criteria that
we believe are important to consider when choosing which stock
broker to use. If you would like us to find out any further
information about a broker listed here, or perhaps one that isn't,
please get in touch and we will be delighted to assist you.
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