If you are interested in spread betting on a small index, you might want to consider the Ireland Top 20, or ISEQ 20 as it is also known. Not all spread betting providers list this one, so you may need to check with your favourite spread betting company. There are some advantages to betting on a less common market, such as the Irish one, as you can be fairly sure that you will not have the largest international finance companies involved and influencing the prices.
Although the Irish Stock Exchange has been around since 1793, it has obviously always been overshadowed by its English neighbour, and in the 1970s even merged with the London Stock Exchange. In 1995 it found independence again, and now runs on an electronic trading platform with which it has attracted various global funds and debt securities.
The acronym ISEQ stands for Irish Stock Exchange Quotient, and there are several indices that fall under this heading, although the Top 20 is the one that will be listed with your spread betting company. As you might expect, its name means that it is an index of the top 20 companies listed on the Irish Stock Exchange, and this is measured with trading volume and market capitalization.
The main constituent companies include CRH, a building material firm, and Ryanair, the budget airline. The ISEQ 20 index was only started at the end of 2004 with a nominal value of 1000, and following the economic distress of recent years is now around 400 – 500, with the banking constituents being a much smaller share of the total. In contrast, the ISEQ overall index is around 2,500, and shouldn’t be confused with the “20”.
If you want to spread bet on the Ireland Top 20, then you should go back to basics. You will not find many commentators giving hints and tips on the likely movement, and in any case it is better to form your own judgment which way a price is going to move. By applying technical analysis to the charts of the ISEQ 20, you can start to get a feel for what drives it.
As mentioned previously, the principal components depend on building and air travel. Other constituent companies that form a major part (more than 10%) of the index are Elan Corporation and Kerry Group PLC. Headquartered in Dublin, Elan is a major drugs firm that is also quoted on other exchanges, and Kerry is a food company which is also quoted in London, and quite well-known to consumers.
Having said that, Ireland is tied into the euro, and therefore the market is very much affected by the European debt crisis, and in particular the Greek problems at the time of writing. Ireland cannot avoid the international influences of the global financial meltdown, and you must learn how best to interpret international news in the context of the Ireland Top 20 Index in order to successfully spread bet on it.
Tips for Mastering Spread Betting on the ISEQ 20: A Trader’s Guide
- Understand the Local Market Dynamics
- The ISEQ 20 consists of Ireland’s top publicly traded companies, with heavyweights like CRH, Ryanair, and Bank of Ireland dominating the index. Familiarize yourself with the index’s composition and the key sectors it represents, such as construction, finance, and pharmaceuticals.
- Monitor Irish Economic Indicators
- Keep an eye on Ireland-specific economic data, such as GDP growth, housing market trends, and unemployment rates. Additionally, watch developments in EU policies and Brexit-related news, as they can heavily impact Irish markets.
- Stay Updated on Corporate Earnings
- As the ISEQ 20 is a small index, individual company performance can significantly influence the overall index. Track earnings announcements, dividend declarations, and major corporate news from the top constituents.
- Leverage Currency Trends
- Many companies in the ISEQ 20 are export-driven. Monitor euro exchange rates (e.g., EUR/USD or EUR/GBP), as currency fluctuations can directly affect the competitiveness of Irish exports and, consequently, the index’s performance.
- Use Support and Resistance Levels
- Smaller indices like the ISEQ 20 often exhibit clear technical levels. Use these support and resistance points to identify potential entry and exit opportunities. Bollinger Bands and Fibonacci retracements can also be helpful tools.
- Focus on Event-Driven Trading
- The ISEQ 20 reacts strongly to significant events like European Central Bank decisions, Irish government budgets, and geopolitical developments. Position yourself ahead of such events to take advantage of anticipated volatility.
- Manage Risk with Stop-Loss Orders
- The ISEQ 20’s relatively low liquidity compared to larger indices can result in higher volatility. Use stop-loss orders to manage your risk and protect against sudden price swings.
- Trade the Open and Close
- Like other indices, the ISEQ 20 experiences heightened activity and volatility at the opening and closing hours of trading. These times provide opportunities for quick profits but require careful monitoring.
- Diversify Within the Index
- While spread betting on the ISEQ 20 as a whole, analyze the performance of individual sectors or companies within the index. Sector-specific trends can help you refine your strategy.
- Adopt a Long-Term Perspective
- The ISEQ 20 reflects Ireland’s economic growth, making it an ideal candidate for long-term trend trading. Align your positions with broader economic cycles for sustained gains.
- Watch for EU-Wide Trends
- Ireland’s economy is closely tied to the EU. Monitor trends in European markets, regulatory changes, and policies that could influence the ISEQ 20’s constituents.
- Practice Patience and Discipline
- The ISEQ 20’s smaller size and volatility require a disciplined approach. Stick to your trading plan, avoid emotional decision-making, and maintain a balanced risk-reward ratio for consistent success.
By combining these tips with thorough research and a solid trading strategy, you can take advantage of the unique opportunities the ISEQ 20 offers.
How to Spread Trading the Ireland Top 20: Ireland Top 20 Spread Betting
One of the smaller international indices is the Ireland Top 20, also called the ISEQ 20, standing for Irish Stock Exchange Quotient. The Top 20 is made up of the top 20 Irish listed shares, based on highest trading volume and market capitalization, and has been in existence for less than ten years.
Say you believe that the ISEQ 20 is going to increase in value, you might see a quote of 414.80 – 416.30 and you place a spread bet of £5 at 416.30 for the Irish Top 20 to go up.
The index rises to a price of 429.30 – 430.80, and then looks like it is stopping, so you decide to take your profits. You “sell” at 429.30, closing your bet, and locking in a gain.
You can work out your winnings like this:
Your point gain was 429.30 – 416.30, which is 13 points.
You bet was for £5 per point.
So you win 13.0 x £5, which is £65.
The financial markets can also fall, and do so a lot of the time. Say that instead of going up, the Ireland Top Twenty began dropping, and you were seeing a quote at your spread betting company of 405.78 – 407.28. You could close your bet at a loss, and that would stop you from losing any more. Your losses would be based on a point change of 416.30 – 405.78. This is 10.52 points.
Your bet was still for £5 per point.
So your loss would be 10.52 x £5.
The total loss is £52.60.
If you had been watching the market, and had anticipated a drop when you first decided to place a bet, then you would have instead sold at 414.80, say £15 per point. Now you are happy to watch it keep falling, and you finally decide to take your winnings when it drops down to 386.57 – 388.07. As you placed a sell bet, it makes money when the index falls, and you “buy” to close the bet. The price you get for this is 388.07.
To calculate your winnings, you have to see how much the index price fell, and multiply by your stake. The index went from 414.80 down to 388.07, where you closed your trade. That is a total of 414.80 – 388.07, which is 26.73 points.
Your stake was £15 per point, so multiplying that out you won 26.73 x £15, which is £400.95.
The markets do not always go the way that you think they will, and if after an initial drop the ISEQ 20 rallied and shot up, you might have to close your bet before you lost too much. With the same stake in a “short” position, the quote on the Irish Top 20 goes up to 420.68 – 422.18, and you decide that there is no hope and you need to cut your losses, closing the bet.
The number of points that it has gone up are 422.18 – 414.80, which is 7.38. At the original stake of £15 this adds up to a loss of £110.70.
