A possible trading strategy for
trading the opening of the FTSE 100
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Last update : March 2010
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| It was certainly possible a couple of years ago and I am sure it still is. But you've got to be patient and wait for your trading spots.
I used to know a trader who specialised in this kind of trading, although he used the FTSE 100 futures rather than spread bets. The strategy was simple -
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- Before the FTSE futures open there is always an opening call, this is an estimate as to where the futures will open
- Perhaps it might be called 15 points higher
- He would then place a limit order to both buy and sell 20 point above and below the expected opening
- For example, if the futures were expected to open at 4200 he'd enter a sell order at 4220 and a buy order at 4180
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The goal of the strategy is to try catch the market off balance in the heat of the opening. If for example everyone is forecasting prices to open 20 points lower and it opens 50 points down there would usually be a mad rush to snap up the unexpected cheap prices.
But the trader's orders would already be waiting in place before the market opened and if filled he'd be quick to take profits of 10 - 30 points, that sort of range. But you have to be quick with entering your orders as the opening few minutes can be extremely volatile.
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| Could the strategy work with spread bets? |
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Yes, I don't see why not. Maybe it would be better to use the daily FTSE future spread bet instead of the daily cash bet as the trading strategy is based off how the official futures are trading.
Be quick to take profits on half your position, and if done use a breakeven stop on the other half. For example, trade £4 of the FTSE, take an initial profit on £2, try to get more for the other £2 but if not a breakeven stop.
Finally, as I said above these trades don't come around that often, perhaps 2-3 every quarter, but when they do the profits are normally excellent.
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| How to forecast the market opening |
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If you don't know any brokers to ask for a FTSE opening call it's not hard to give accurate calls yourself. All it takes is a few months of experience and practice. Use thinking along these lines -
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- The FTSE cash market closes at 4.30pm. Take note of that level and where the American S&P 500 futures is trading (or you can use the 6pm level of the FTSE futures against where the S&P is)
- The S&P futures trade 24 hours so look where they're trading at 7.55am and work out the difference between yesterday's price at 4.30pm
- Translate that into FTSE points, perhaps using a percentage
- This might sound complicated but it's not if you work at it
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