2 Key Reasons Why Many People Lose Money Trading The Ftse 100
A lot of people have attempted to make money trading the FTSE 100 over the years
, but very few of these people have actually been successful in the long run. This could be down to any number of reasons, but in my experience there are two key reasons why people find FTSE 100 trading so difficult.
The first reason is simply because there are a lot of external influences that have an impact on the price direction of the FTSE 100 on any given day. This makes it extremely difficult to predict where the price is heading, even if you use technical analysis to help you.
One of the biggest factors is the Dow Jones index. If you watch the FTSE 100 from around 14.30 (UK time) onwards, you will notice that this index basically just moves in accordance with the Dow Jones. So if the Dow Jones drops sharply during the afternoon, you can be sure that the FTSE will be heading south as well. Plus even during the rest of the day, you will often see this index move in line with the Dow futures, rather than move independently.
Not only that, but you also have various economic data releases to contend with during the day as well. For instance you will often have some UK data figures being released at around 9.30, which may move the markets, and then you often have some US figures coming out at between 13.30 and 15.00, which will also move this index, even though it is relevant to the US economy rather than the UK economy.
The second reason why it is so hard to make consistent profits trading the FTSE 100 is simply because it is very unpredictable. I think this is largely because it is an index made up of 100 different companies, all of which can move in a random fashion.
You can still use technical analysis to predict future price moves, but it doesn't always work that well on an intraday basis. Your job certainly isn't made any easier by the fact that there are so many things that can have an impact on this index, as I mentioned earlier.
So the point is that although there are some people who do make money trading the FTSE 100, I would say that they are definitely in the minority. I've certainly never been that successful trading this index myself, which is why I prefer trading stocks and currencies, however that's not to say that you shouldn't try it out for yourself because you may well be successful.
by: John Robertson
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