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How Inflation Impacts the FTSE100 Trading Range

The FTSE100 index futures and options market has been affected by recent global inflation pressures. Consequently, over the last few weeks the trading value of this particular market has dropped by approximately forty percent. This reduction in market value came about due to increased demand for raw materials amid rising food prices and reduced profit margins felt by traders. While the overall inflation rate throughout the world is still low, it is believed that traders have become increasingly concerned about the dwindling value of their cash and equity positions in their companies. This is why many are looking towards index futures and options as a way to secure their financial futures.

One of the reasons why traders have turned to these options contracts is because they are highly leveraged. It is because you only need a small amount of money to open a position and since the price moves swiftly across the board, you can easily double or triple your initial investment in very little time. One problem that most experienced traders have encountered however is that since most market participants are not necessarily looking to enter into long term trades, it often leads to poor execution and price action that leave you no wiser than when you began. If you are to overcome this obstacle, you must know the fundamental methods on how to increase volatility and reduce the size of any lopsided price action so that you can capture a greater share of the overall market.

Volatility is defined as the measure of the rate of change of an underlying asset over time. Usually, changes in volatility occur in response to external factors. However, it is also dependent on the characteristics of the underlying asset. In general, stocks with strong fundamental factors such as steady earnings, debt to equity, and market weight, are likely to exhibit greater volatility. In addition, the strength of an underlying security also reflects the probability of an economic disturbance in the market. More precisely, a company’s growth rate, its ability to generate profit, and its competitive position are all considered important indicators of market movement and are consequently reflected in its volatility.

The degree of market fluidity is also considered by the market makers who facilitate trade in Forex. The FTSE100 index itself is a market that exhibits moderate to significant volatility. This is primarily attributed to the varying economic conditions in different countries throughout the world. Because of this, most of the trading activities inside the market are characterized by price action that is quite unpredictable. This unpredictability has made the task of the market makers quite difficult. It is only by means of taking advantage of the index’s price dynamics that they can successfully capture a bigger piece of the overall Forex pie.

One way to make the market more predictable is to employ the use of moving averages. These are typically used to indicate price trends. A simple example would be to compare the end of one period and the beginning of another one within the same index. These moving averages serve as converging lines and are often employed by market makers to help them capture the essence of underlying asset prices.

Another important factor that affects the volatility of the FTSE100 index is the timing on which it begins to rise and fall. When the price action is bearish, as indicated by the direction of the moving averages, investors tend to take profit and sell as soon as the prices reach the resistance levels. When the price action is bullish, such as indicated by the direction of the standard deviation of the underlying asset price, investors tend to buy and hold and wait for the prices to rise. Although there are many factors that affect the nature of the FTSE100 index, changes in the economic situation of a country are among the primary ones that influence its exchange rate.

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