TABLE OF CONTENTS

Why Trade UK100?

Which UK100 Strategy is Best for You?

GBFalcon UK100

The Strategy

Step 1: Spotting The Trend

Step 2: Filtering the Trend

Step 3: Focusing on Trade Opportunities

Step 4: Execution

Execute the Trade and Manage Your Risk

RAPTOR for UK100

The Strategy

Step 1: Spotting the Trend

Step 2: Filtering the Trend

Step 3: Finding Trade Opportunities

10

Step 4: Execution

11

Execute the Trade and Manage Your Risk

11

Whats Next?

12

Extended Learning

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TRADING INDICES WITH FXCM

Dear Trader,
Im Walker England, educator at DailyFX, and I want to teach you how to trade one of the most exciting CFDs (contracts
for dierence): stock indices.
When you trade CFDs with FXCM, you can easily take broad market positions on a variety of stock indices from around
the world. Plus, our single sign-on access lets you trade stocks, forex and other CFDs all on the same platform.

WHY TRADE INDICES THROUGH FXCM?

No Re-Quotes: Enjoy fast, ecient trade execution without expensive re-quotes1
Competitive Pricing: Gain exposure to global markets with our low spreads
No Commission: Trade commission free on all FXCM products2
Leverage: Gain access to leverage by trading on margin3
Hedging Capability: Go long or short in a single index trade
Micro CFDs: Trade the global market on any budget

The strategies in this guide are designed by me and my team at DailyFX to get you comfortable trading the index market.
ONE NOTE: For the strategies, Ive used FXCMs proprietary Trading Station platform, which you can download for free.

SO, LETS GET STARTED.

Happy Trading,

Walker England
Forex Trading Instructor
Twitter: @wenglandfx

INSTRUCTOR SPOTLIGHT: WALKER ENGLAND

Expertise: Short-Term Strategies, Scalping, Price Action Analysis, Risk Management
Walker is an education instructor for DailyFX, specializing in short-term trading strategies for forex and
CFD products.
He holds degrees in Economics and Finance from Texas State University. His primary focus is trading,
with more than 12 years of experience across international markets. Walker actively publishes market
articles and produces educational webinars for DailyFX.

1 No Re-Quote Policy: FXCM maintains a no re-quote policy. Circumstances exist based on order size, trading pattern, and

market conditions where individuals may not receive execution at the requested rate. Orders are executed at the next
available rate within the trader's parameters, subject to market conditions. The dierence between the requested rate
and nal execution price may be more or less advantageous based on the market activity and available liquidity.

2 Compensation: When executing customers trades, FXCM can be compensated in several ways, which include, but are

not limited to: adding a mark-up to the spreads it receives from its liquidity providers, receiving compensation for order
ow, and charging commission to accounts that trade with FXCM's lowest spreads which are available to qualifying
accounts. Under the Dealing Desk execution model, FXCM may act as a dealer and may receive additional compensation
from trading.

3 Leverage: Leverage is a double-edged sword and can dramatically amplify your prots. It can also just as dramatically

amplify your losses. Trading foreign exchange with any level of leverage may not be suitable for all investors.

Risk Warning: Our service includes products that are traded on margin and carry a risk of loss to all of your deposited
funds and may not be suitable for all investors. Please ensure that you fully understand the risks involved.

WHY TRADE UK100?

DID YOU KNOW?

The London Stock Exchange is one of the largest in the world, with nearly 3,000 companies

UK100 Averages 3,500 pips

listed from around the world. Now, traders all over look for good, cheap ways to trade a

of monthly movement

basket of UK stocks.

use UK100 to trade moves

FXCMs UK100 index is the answer. UK100 tracks the 100 top-performing companies in the

in the UK market.

London Stock Exchange. With FXCMs low transaction costs, a good trading strategy, and the
advantage of leverage (which can magnify gains as wells as losses), youre ready for any
market condition.
This UK100 Trading Guide gives you the ins and outs of two unique trading strategies
and the technical indicators that help determine buy and sell signals.
Feel free to test these strategies on a free FXCM demo account, which has live UK100
prices, on our proprietary Trading Station platform.

WHICH UK100 STRATEGY IS BEST FOR YOU?

Like the speed and excitement of day trading? Then the GBFalcon UK100 strategy may be
for you. Or are you more of a long-term trader? Then RAPTOR for UK100 is your best bet.

GBFalcon UK100

A TREND

Day trading on shorter timeframes can be benecial, especially to those traders with busy

The general direction price

schedules. The good news is the analysis itself also doesnt have to be overly complicated.

moves over a dened time

The GBFalcon UK100 strategy is designed to get you in on the right side of UK100 when its

period.

overbought or oversold, and then get you out before prices reverse.

THE STRATEGY
There are four steps to nding opportunities in our GBFalcon UK100 strategy.
1. SPOTTING - Use a 30-minute chart to nd the direction of the UK100 trend
2. FILTERING - Conrm the trend by ltering with a 200-period EMA on a ve-minute chart
3. FOCUSING - Once the trend is conrmed, use MACD to nd shifts in trend momentum
4. EXECUTING - Buy or sell using two orders for multiple exits

STEP 1: Spotting The Trend

Looking for the trend is as straightforward as checking your graph for higher highs or lower lowscan you see an uptrend or
downtrend from across the room? Use a 30-minute chart to see if UK100 is on a tradable trend (expand your chart out to
a week or two).
Below is an example of a downtrend, where price moves consistently to lower lows. Note that the trend lasts more than
six trading daysthis adds validity to your market bias (bullish or bearish). Once a trend is established, buying and selling
decisions are easier: You want to buy in an uptrend and sell in a downtrend. If no upward or downward trend is found, now
isnt a good time to execute our UK100 strategy.

STEP 2: Filtering the Trend

We need to lter the trend further to support our strategy. A great tool to lter the trend

EXPONENTIAL
MOVING AVERAGE

is an Exponential Moving Average (EMA) indicator set to 200 periods. The 200-period EMA

Retail traders and seasoned

spots directional shifts in the market and can be used as a level of support and resistance.

professionals from banks

Once the broader trend has been established from Step 1, switch your UK100 30-minute
chart to a ve-minute chart (click Chart, Show Data Range, Five Minutes, then 1 Day),
then add an EMA (right-click on your chart, click Add Indicator, then select EMA and enter

and hedge funds use EMAs,

increasing the indicators
validity.

200 in Periods).
In an uptrend, only look to buy UK100 if the current price is above the EMA line; in a
downtrend, only look to sell if price is below the EMA line. If the price is exactly on the
EMA line, then wait for better UK100 trading opportunities that meet these parameters.

EMA (UK100,Close,200): 6,699

200 EMA

6,834

Only Sell in a Downtrend When Price

is Under the 200 EMA

6,589
03/06/2014 10:30

Step 3: Focusing on Trade Opportunities

MACD OSCILLATOR

With steps 1 and 2 establishing our trend, we can check the market for opportunities to

Gives an easy-to-identify

nd and execute a trade. Use the Moving Average Convergence/Divergence (MACD)

entry point by revealing

oscillator (right-click on your chart, click Add Indicator, then select MACD).

shifts in momentum back in

Heres how you use the MACD to nd a sell signal. First, watch for MACD to move under

the direction of the trend.

the zero line that divides the oscillator horizontally. When the red MACD line crosses back
below the blue line, execute your sell trade. Conversely, in UK100 uptrends, only buy when
MACD is over the zero line and the red line crosses above the blue line.

EMA (UK100,Close,200): 6,697

6,580
03/06/2014 9:30

03/10 4:00

14:30

03/11 12:00

03/12 9:30

03/13 7:00

MACD (UK100,Close,12, 26, 9) - MACD: -10.10 SIGNAL: -7.58 HISTOGRAM: -2.52

Only Enter Sell Positions on MACD Crossovers Under the Zero Line

10.00

0.00

-10.00

-20.00

Step 4: Execution
When conrming signals for buying or selling, watch for all three conditions to occur:
SIGNAL TO BUY:

THE GBFALCON
UK100 RISK
RECOMMENDATION
Cap your risk at a maximum

1. UK100 trends upward

of 1% of your account

2. The current price is above the 200-period EMA

3. When MACD is above the zero line and the red line crosses above the blue line

balance.

SIGNAL TO SELL:
1. UK100 trends downward
2. The current price is below the 200-period EMA
3. When MACD is below the zero line and the red line crosses below the blue line
If the three conditions within the signal are met, its time to execute the trade.
If neither set has matching conditions, wait for better opportunities. This strategy requires you to open two individual
ticketsyour lot size can vary to suit your risk tolerance.
EXECUTE THE TRADE AND MANAGE YOUR RISK
Always have a dened risk tolerance when entering into a trade.
The GBFalcon UK100 stop price is always based on the current 200-period EMA price line. Use a little wiggle room and place
stops below the EMA line when buying or above when selling.
GBFalcon UK100 utilizes a two-lot system with dierent limit points (where you take your prot).
LOT ONE: Use a 1:1 risk-reward ratio. Set the stop price and limit price each an equal number of pips from the entry price.
If the stop is 50 pips from entry (based on the EMA price), the Lot One limit is set at 50 pips of prot.
LOT TWO: Set your stop at the same price as Lot One, but use a trailing stop (click Stop, click Trailing Stop, click Dynamic).
The Trailing Stop automatically moves your stop price forward as the trade goes in your favor. Leave Lot Two open as the
position continues to trend. The position closes when the market price reaches the current trailing stop point.

EMA (UK100,Close,200): 6,697

Manage risk with stops above

the 200 EMA in a downtrend

6,800

6,750

6,700

6,650

6,000
6,580
03/06/2014 9:30

03/10 4:00

14:30

03/11 12:00

03/12 9:30

03/13 7:00

17:30

RAPTOR for UK100

Finding and trading long-term trending movements on UK100 can be benecial to traders
who prefer to monitor positions less intensely. The RAPTOR for UK100 strategy harnesses the
stochastic oscillator to nd trend pullbacks (changing directions), giving you an advantage in
trading the trend.

THE STRATEGY
There are four steps to nding opportunities in our RAPTOR for UK100 strategy.
1. SPOTTING - Use a daily chart to nd the directional movement of the UK100 trend
2. FILTERING - Conrm the trend by ltering with a 200-period MVA
3. FINDING - Once the trend is conrmed, use SSD to nd overbought/oversold conditions
4. EXECUTING - Look for pullbacks on SSD lines for entry orders

Step 1: Spotting The Trend

A TREND

When trading longer-term momentum, trend direction is crucial in determining whether

The general direction price

we buy or sell UK100.

moves over a dened

time period.

Looking for the trend is as straightforward as checking your graph for higher highs or
lower lows. Use a daily chart to see if UK100 is on a tradable trend.

Step 2: Filtering the Trend

The Simple Moving Average (MVA) is an eective trend-ltering tool, used by a variety of

SIMPLE MOVING
AVERAGE

traders to nd the direction of the trend. Use a 200-period MVA (on your chart, click Insert,

Retail traders and seasoned

Add Indicator, then select MVA set to 200 periods), and look for a mature trend.

professionals from banks

and hedge funds use MVAs,

Consider buying if the current UK100 price is above the 200-period MVA. Likewise, sell

increasing trend validity.

only when price is rmly below the indicator line. Below is a scenario where you should
only look to sell UK100.

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

MVA (UK100,Close,200): 5,687

6,000

5,750

5,493

5,250

5,000

4,750
01/21/2011

03/23

04/26

05/30

06/29

07/29

08/30

09/29

10/31

Step 3: Finding Trade Opportunities

Technical traders often use oscillating indicators to nd pullbacks against the trend,

STOCHASTIC SLOW
OSCILLATOR

allowing them to buy or sell at a preferred price.

A classic oscillator

Use the Stochastic Slow Oscillator (SSD) on a two-hour chart (on your chart, click Insert,
Add Indicator, then select SSD). Your SSD should have Parameter Calculations of 15,
5 and 5.

specically designed to
show momentum resuming
in the direction of the trend.

When buying in an uptrend, look for pullbacks on the stochastic line (blue line) underneath
20an oversold condition. This signals a dip in price; you want to buy when momentum
shifts back above the oversold line. Conversely, in a downtrend, look to sell when the
stochastic line moves to overbought levels (80 or higher) and re-crosses the line heading
lower.

100

STOCHASTIC (UK100,15, 5, 5, MVA, MVA) - K: 51.18 D: 33.28

Overbought
80

50.00

20

Oversold

10

Step 4: Execution

RAPTOR FOR
UK100 RISK
RECOMMENDATION

When conrming signals for buying or selling, watch for all three conditions to occur:
SIGNAL TO BUY:

Cap your risk at 1% of your

1. UK100 trends upward

account balance. Set your

2. The current price is above the 200-period MVA

limit at 2% prot per trade.

3. The SSD line (blue) has crossed below 20 and re-crossed back above 20
SIGNAL TO SELL:
1. UK100 trends downward
2. The current price is below the 200-period MVA
3. The SSD line (blue) has crossed above 80 and re-crossed back below 80

If the three conditions within the signal are met, its time to execute the trade. If neither set has matching conditions, wait for
better opportunities. This strategy only requires a single trade ticket for each buy or sell signal.

EXECUTE THE TRADE AND MANAGE YOUR RISK

Always have a dened risk tolerance when entering into a trade.
For our RAPTOR for UK100 strategy, if there is an uptrend and you are buying, then place your stop just below the low
of the past 15 candles. If the market is in a downtrend and you are selling, then place your stop over the highest price of
the last 15 candles.
Set your limit to take prot if UK100 moves in your favor. Use a 1:2 risk-reward ratio (twice the distance of your stop entry).
For example, if risking 50 pips with a stop, at minimum, look for a 100-point prot target. Set your limit price 100 pips above
your entry price.
10/05

10/09

10/13

10/17

10/21

10/25

MVA (UK100, Close 200) : 5,474

Limit
5,496

Entry

0.00

Stop

5,250

10/04/2011 03:00

10/07 09:00

10/12 03:00

10/14 11:00

10/19 05:00

10/21 13:00

10/26 07:00
100

STOCKASTIC (UK100,15, 5, 5, MVA, MVA) - K: 31.24 D: 41.71

80

Buy
20
0

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WHATS NEXT?
Youve learned two trend-based strategies for UK100. You can start risk free: Sign up for an FXCM demo account. The FXCM
demo account oers a free simulation of a real trading account and all the functions of a real trading accountstreaming
prices, charts and others.
With the demo, you get the feel for how these strategies work. You can practice trading your opinion of UK100, buying and
selling directly on the FXCM Trading Station platform.
Ready to try it live? Open an FXCM account today and put your strategies into action

EXTENDED LEARNING
FXCM oers a variety of resources to traders. Additional strategies to trade the market are available after opening a real
trading account. You gain access to DailyFX Plus and more than 25 live trading webinars each week.
Some good resources for extended learning:
TRADING WITH MOVING AVERAGES
TRADING WITH STOCHASTICS
TREND TRADING
If you have any questions on trend trading, opening demo or real accounts, or you need more information, contact us at
0808.234.8789 or +1.212.897.7660 for a one-on-one strategy discussion.

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