Many traders in the United Kingdom have been made to FTSE 100 years, but very few people manage consistent profits on trading. What are the reasons why so many people end up losing money?
And I think the main reason is because there are several factors that affect the movement of this index, and many of them are almost impossible to predict. To start you often economic data released in the early stages of the day, which can often have a dramatic effect on the movement of this index.
You will also find that later on the day of the FTSE 100 will basically just follow the Dow Jones. If the Dow Jones starts moving sharply higher, then the FTSE 100 will almost certainly do the same. It is sad to see our main index mimicking the Dow Jones in this way, but this happens every day. The only time this will move regardless is the first half of the day, ie when the u.s. markets are closed, but even then you will find often that this indicator will follow on forward Dow.
Also because of this you often get sudden surges in this index when there are any announcements of important economic data coming from America. The most important announcements will often have a significant impact on the markets of the USA (or forward) if they occur before the market opens and the FTSE will respond accordingly. This makes it very difficult to predict where the market is heading in the near future.
Another reason why is it so difficult to trade this index is because apart from all external influences, it is also very unpredictable. Can a few days to move 100 points and it is very easy to trade, while other days it may trade in a very narrow range of say 30 points and move almost at all during the day. Plus when you factor in the spread, which can be two or three points, it is not easy.
The same applies when you trade in early morning breakouts. This is often the best way to trade this index, but even then there are often times when the pointer is very indecisive and there are many false trademarks.
So overall it's easy to see why many people who try to trade the FTSE 100 often end up losing money in the long term. In General, most people find that it is much easier to trade individual shares or on the forex market.
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