Trading the FTSE 100, especially after its recent record-breaking run, demands effective strategies to navigate potential volatility. The market’s tendency to consolidate or pull back after significant gains offers both challenges and opportunities. For short-term traders, identifying key technical levels becomes paramount. The psychological 10,000 mark has now transitioned from a resistance level to a critical support zone; a decisive break below it could signal a deeper correction, while holding above it reinforces bullish sentiment. Similarly, monitoring the Relative Strength Index (RSI) can provide clues about overbought or oversold conditions, helping to time entries and exits. When the RSI enters ‘overbought’ territory (above 70), caution is advised against chasing the rally; instead, look for pullbacks to previous support levels, such as 10,150 or the aforementioned 10,000.
For longer-term investors, the focus shifts to dollar-cost averaging and dividend reinvestment strategies. Regular contributions, regardless of market fluctuations, can smooth out entry prices over time. Furthermore, reinvesting the attractive dividends offered by many FTSE 100 constituents can significantly enhance total returns through compounding. Implementing robust risk management techniques, such as setting appropriate stop-loss orders (typically 1.5x the average daily volatility from your entry) and adhering to the ‘1% rule’ (never risking more than 1% of your total capital on a single trade), is non-negotiable. These strategies help protect capital during unexpected downturns and ensure longevity in the market.