Investing in the IBEX 35 Index - All you need to know
Do you want to invest in the IBEX 35 index? Do you know what the IBEX 35 is and how it works? In this article we will explain everything you need to know about the main index of the Spanish stock market. We will talk about its composition and all the possibilities at your disposal to invest in this index.
Table of Contents
- The IBEX 35 index - A definition
- The IBEX - Composition
- The IBEX - Curiosities
- The IBEX - Times of greatest volatility
- The IBEX - Impact of the coronavirus crisis
- The IBEX - Technical analysis
- The IBEX - Correlation with the S&P500
- Why trade CFDs on the IBEX 35?
- How to invest in the IBEX 35 with CFDs
- The IBEX 35 - How to sell CFDs
- How to invest in the IBEX 35 CFD
- Trading the IBEX 35 - Scalping / Day Trading Strategy
- Invest in IBEX 35 - Other trading strategies
- The IBEX 35 - Advantages of trading with Admirals UK
The IBEX 35 index - A definition
What is the IBEX 35 index? In Spain, the IBEX 35 index (sometimes referred to as the IBEX 35 index fund) is the benchmark index of the Madrid Stock Exchange (a Spain stock exchange), the main stock exchange in Spain. The index is managed by Bolsas y Mercados Españoles (BME), the operator of all Spanish stock markets, which has just been acquired by the Swiss group SIX.
⌛ Founded in 1992, the IBEX index is made up of the 35 most liquid Spanish companies listed on the general index of the Madrid Stock Exchange. Inaugurated on January 14, 1992, the IBEX is weighted by market capitalization. That is, companies with higher value have more weight.
This Spanish stock market index had an important progression in comparison with other indices of the European stock market, especially between 2000 and 2007, thanks to the strong internal economic growth in Spain. However, there was no IBEX 35 index expansion of the number of companies in the index. This involved something else.
In contrast to the FTSE 100, CAC 40 and AEX 25 indices, which reached their highest levels during the dot-com bubble in the early 2000s, the IBEX hit its record high on November 8, 2007 at 15,945.70 points.
The hours for trading with the IBEX are from Monday to Friday (09:00 - 17:30).
There is another, similar index, called the IBEX 35 Total Return index (or IBEX Total Return). This article focuses on the more common IBEX 35. The main difference between the two is that the second index reinvests dividends in the companies that comprise it, which is why some analysts argue that the latter is a more profitable asset. Of course, the cash of the dividends is never collected.
The IBEX - Composition
The composition of the Spanish IBEX is reviewed twice a year (June and December). However, on September 10, 2020, at an unplanned regular meeting, the Index Committee announced by surprise the exclusion of Ence from the index to be replaced by PharmaMar.
To be included, companies must meet a series of strict requirements. In general, at each review, those with the highest volume of transactions are chosen compared to the previous six months.
✍ In June 2019, for example, the IBEX 35 Committee excluded Técnicas Reunidas, which had debuted on the index 11 years earlier. The company's shares left this Spain index at half the price of its debut. Its place was taken by MásMóvil. However, this company is expected to leave the index soon, after being the subject of a takeover bid.
In the IBEX35 index calculation, share prices are weighted by market capitalization, which means that larger components have a greater impact on index price movements than smaller ones.
Below we can see the 10 companies with the greatest weight in the IBEX 35:
Source: BME. August 2020
The IBEX - Curiosities
- Since its creation in 1992, this Spain stock index has appreciated around 250% and the average profit per year is 6.82%
- The IBEX35 has become the national and international benchmark of the Spanish Stock Exchange and the underlying asset of a multitude of financial products
- Of the current composition of companies, the energy sector is the group that has lost the most weight
- The 35 components of the IBEX35 represent 90% of all the cash traded on the Spanish Stock Exchange
- The IBEX reached its highest level on November 8, 2007, when it closed at 15,945.70 basis points
The IBEX - Times of greatest volatility
The Spanish index tends to experience greater volatility on these occasions:
- Opening of sessions of the European stock exchanges
- Economic news posts
- ECB press conferences
- ECB interest rate decisions
- Results of the main companies in the index
You can check the dates of relevant publications such as those of the European Central Bank (ECB) in our economic calendar.
Once this introduction is made, we can now answer the following questions:
- How to invest in the IBEX35?
- Why invest in IBEX35?
We will see the answers below. But first, if you want to expand your knowledge in trading, you can sign up for our free Zero to Hero trader course. Click on the following button and Register!
The IBEX - Impact of the coronavirus crisis
On March 9, 2020, the IBEX experienced one of the worst sessions in its history, so much so that many analysts refer to it as a new 'Black Monday'.
▶ ️ The crisis caused by the spread of the coronavirus in several European countries, aggravated by an oil price war, led this Spanish index to close its session with a fall of 8.10% to 7,697 points, the lowest since 2016, Brexit year.
This day deepened the losses of the previous two weeks in which the IBEX 35 had left more than 15%, while the coronavirus spread through Europe and international organizations cut their economic forecasts.
❎ The falls in European equity markets were widespread. The Italian stock market was the most affected, with a decline of just over 11% coinciding with the closure of several Italian provinces to stop the spread of the virus, measures that on Tuesday, March 10, were extended to the entire country.
Wall Street also panicked, with the Dow Jones and the S&P500 falling 7%, activating the circuit breakers that paralyzed trading for 15 minutes. The Dow Jones closed its worst session since December 2008, following the outbreak of the financial crisis.
But let's go back to the IBEX and see how the outbreak of the coronavirus pandemic affected the index:
Source: Admirals MetaTrader 5 Supreme Edition. IBEX 35 daily chart. Data range: May 8, 2019, to September 11, 2020. Prepared on September 11, 2020, at 1:00 p.m. Please note that past performance is not a guarantee of future performance.
As we can see in the graph above, the Spanish index began to collapse in the last week of February, when the coronavirus began to spread exponentially in Italy and gradually increased in Spain. In the area shaded in pink we can see the vertical fall that the IBEX starred in, including the gap, after having maintained a bullish channel from the last quarter of 2019 until the first weeks of 2020. In this scenario, many traders chose to go short.
The IBEX - Technical analysis
Source: Admirals MetaTrader 5 Supreme Edition. Daily chart CFD IBEX35. Period: June 1, 2016, to September 11, 2020. Prepared on September 11, 2020, at 1.30 p.m. Keep in mind that past performance is not a reliable indicator of future results.
Looking at the general panorama in the last two and a half years on this IBEX 35 index live chart, we can see that after reaching highs at 11,200 points, the IBEX 35 began a clear downward path that extended to 8,300 points, a level it reached in December 2018.
In August 2019, the Spain index started an uptrend that was interrupted by the outbreak of the coronavirus crisis. On September 11, 2020, the IBEX 35 was struggling to stay above 6,900 points and since February 3rd, 2021 it has been holding above 8,000. Will it continue to rise?
On September 11, 2020, the Mini Terminal of our MetaTrader 5 Supreme Edition indicated the following:
Let's now look at a strategy on this index using moving averages.
Source: Admirals MetaTrader 5 Supreme Edition. Daily chart CFD IBEX 35. Period: April 15, 2019, to September 11, 2020. Taken on September 11, 2020, at 1:45 p.m. Keep in mind that past performance is not a reliable indicator of future results.
To analyze the IBEX 35 trading chart we have added the following exponential moving averages (EMA):
14-period EMA: Blue
64-period EMA: Green
200-period EMA: Orange
The moving average trading strategy is to see buying opportunities when the short-term averages cross up the longer-term averages, while the selling opportunities occur in the opposite direction.
Let's see the details:
✔️ The first arrow indicates a buying opportunity by crossing the 14 EMA to 64 EMA upwards. This indicates that the price could go up.
✔️ The next green arrow is another buying opportunity, when the 14 EMA crosses the 200 EMA upwards.
❌ The red arrow indicates a sell signal, where the 14 and 64 EMAs cross below the 200 EMA.
In the chart, the moving averages are in a downtrend.
The IBEX - Correlation with the S&P500
Let's see the evolution of the CFD on the IBEX35 versus the evolution of the CFD on the S&P500.
Source: Admirals MetaTrader 5 Supreme Edition. Daily CFD IBEX 35 chart. Period: February 2019, to September 11, 2020. Prepared on September 11, 2020, at 2:00 p.m. Keep in mind that past performance is not a reliable indicator of future results.
In the graph we can see how the drawing in both cases is similar up to the beginning of July. From there, the S&P500 continues its upward trend while the Spanish index fails to break away from the 7,000 point environment. These details can be seen better with the Matrix Correlation tool:
Source: Admirals MetaTrader 5 SE. Capture taken on September 11, 2020, at 2:00 p.m.
In the image we see how the correlation between the S&P500 and the IBEX 35 at that moment was +30. Therefore, it was very weak. This means that the Spanish index was not likely to follow the trend started by the US market. However, it had a high correlation with the FTSE100 (+97).
You can do your own technical analysis by downloading the MetaTrader 5 Supreme Edition platform for free. You just have to click on the following banner and follow the instructions:
Why trade CFDs on the IBEX 35?
Many traders argue that it's best to invest in low-cost market indices and adjusting their allocation. This is one reason index-based ETFs can be useful. However, the benefits of trading CFDs on the IBEX 35 speak for themselves:
- There is no commission on your trading positions on the Spanish index
- Amount needed to start trading: €100
- Typical spread of 3.5.
- Access to operate with CFDS on the IBEX 35 even with small amounts (from €0.10 per point), which makes access possible to all, either to learn or to generate additional income or capital.
- Access to 1:200 leverage for professional clients and 1:20 for retail clients.
When it comes to investing, one of the best ways to trade and achieve long-term success is to trade an index of stocks or shares. However, you have to be aware of the risks involved as it is a complex product.
Traders sometimes call them stock indices, because stocks are the underlying assets of the indices.
Trading the Spanish index, and indices in general, is very interesting for one main reason:
|You don't have to worry about choosing individual stocks to buy. In the case of the IBEX index, instead of choosing between BBVA and Telefónica, you have the opportunity to operate both, as well as the other 33 listed companies on the IBEX 35 in Spain.|
How to invest in the IBEX 35 with CFDs
Do you think the Spanish economy will recover soon from the coronavirus crisis?
Learn how to buy the IBEX35 CFD to take advantage of bullish movements!
Here is an example of an intraday trader, who wants to take advantage of the opportunities to speculate upward by using the following steps in MetaTrader 5 Supreme Edition:
- Once connected to your trading platform, you must add the Mini Terminal to the CFD IBEX 35 chart.
- Enter the number of Stop Loss points, as well as the risk.
- Click "Set batch"
- Then, you can activate a buy order in the market by clicking the "Buy" button or place a pending order using the green vertical column to the left of the Mini Terminal.
If you opt for the pending order, keep in mind that you will have to follow these steps:
- Click on the entry point that interests you
- Click on the desired Stop Loss point
- Click on the desired Take Profit point
Of course, it’s possible to remove a Take Profit if you follow a strategy with several Take Profits. To do this, use the Take Profit line label to select "T/P" and then "None."
In a rising market, your chances of success are higher if you try to speculate only in this way. It’s logical but essential.
Both scalping and day trading can take advantage of this trend during an IBEX index trading session.
The IBEX 35 - How to sell CFDs
Do you think that the Spanish economy will take time to recover from this crisis and that the index could go down?
Here's how to sell CFDs on the IBEX 35!
It's very simple, just follow exactly the steps outlined above to buy on the IBEX35.
The only differences are:
- The activation of a sell order to the market to speculate on the fall of the CFD on the index is carried out through the "Sell" button of the Mini Terminal
- Positioning of a pending order to sell the CFD on the IBEX 35 stock index is done through the red vertical column, located just to the left of the Mini Terminal
Similarly, you can cancel the Take Profit later if you follow a strategy with several Take Profits. To do this, use the Take Profit line label to select "T/P" and then "None."
How to invest in the IBEX 35 CFD
Do you want to trade CFDs on this Spanish index? We offer you several options and strategies. Let us begin!
Scalping and Day Trading with the IBEX 35
For active traders who want to get results quickly, scalping and day trading are styles of trading that may be suitable.
Be careful, the results obtained in a very short time with these trading approaches can be good or bad, and will depend essentially on your operation.
Some traders have specialized in trading on the economic calendar, allowing them to further reduce the time spent trading.
With this approach, your sessions are clearly defined and the time spent behind screens is greatly reduced.
Swing trading the IBEX 35
For those who already have a job that takes up part of their time or who prefer a more thoughtful and calm activity, swing trading is more comfortable and convenient.
This methodology is very time consuming. The idea is mainly to find good trading opportunities in fairly large time units such as H4, daily and weekly charts.
Trading the IBEX 35 - Scalping / Day Trading Strategy
Those who want to scalp with the Spanish index should know that there are many ways to do so. We’re going to present you an effective strategy that we recommend you try on a demo account before trading on a real account.
The following strategy requires the use of the MetaTrader 4 or MetaTrader 5 Supreme Edition plugin, so be sure to download it before you start.
The free Admiral Donchian indicator from MetaTrader 5 Supreme Edition will be the basis of this approach.
The trading theory exploited in this CFD strategy is to take advantage of two elements:
- The opening effect of European markets
- A daily breakout to speculate on the movement of the session
In fact, with this type of focus it’s possible to capture the most movement of the session. As a result, high volatility days are likely to be profitable, but on the other hand, range trading days will be more detrimental to results.
Source: Admirals MetaTrader 5 Supreme Edition. Chart M5 IBEX 35. Data range: from September 9, 2020, to September 11, 2020. Prepared on September 11, 2020, at 3:00 p.m. Keep in mind that past performance is not a reliable indicator of future results.
Time frame: 5 minutes
- Admiral Donchian from MT4 and MT5 Supreme Edition
- Mini Terminal MT4 and MT5 Supreme Edition
IBEX trading time: The European session starting at 9 am (you can also use Admiral Day Session if it’s easier for you to determine the right session for you).
- Long position (buy): the price must break the upper part of the channel of the Admiral Donchian indicator in period 12 and close
- Short position (sell): the price must break the lower part of the channel of the Admiral Donchian indicator in period 12 and close
With this IBEX Scalping/Day trading strategy, only two signals can be considered per day. Sometimes both positions, buy and sell, are activated.
- Stop Loss position. Whether long or short, the Stop Loss is on the other side of the Donchian Channel in a period of 12.
- Take Profit position. Whether long or short, Take Profit is 0.5-1 the size of the Donchian range.
Position management. A trailing Stop can be placed as soon as the one-to-one ratio is reached. Part of the position can be closed at the end of the session.
Invest in IBEX 35 - Other trading strategies
Swing trading is most likely the strategy that best suits the investor's profile when it comes to trading CFDs.
The IBEX swing trader can potentially increase the value of his equity portfolio by speculating higher when the market is following a healthy and sustainable trend, but he can also cut his losses in the equity market when the Spanish economy is in trouble.
The Ichimoku Kinko Hyo trading and analysis system is a good starting point for beginner and intermediate traders.
To exploit the trading opportunities offered by the Ichimoku analysis, some conditions must be met:
- Study the weekly trend, according to the Ichimoku kinko hyo system
- Study the daily level of Chikou to find support or resistance
- Expect a daily retracement in the Kijun which also represents 50% Fibonacci
- Expect a daily bullish or bearish close, depending on the trend
The IBEX 35 - Advantages of trading with Admirals UK
- Negative Balance Protection Policy that will protect you in the event that the account is left with a negative balance.
- Free real-time Indices, CFDs and professional trading charts via MetaTrader 4 and 5 Supreme Edition online trading platforms.
- Speed, comfort and elegance: Trading in a fraction of a second with the Mini Terminal
- One of the best regulations in the world of online trading - England FCA Regulation
- News in real time, directly on MT5.
- Excellent conditions for deposits and withdrawals.
- Coverage is possible and permitted.
- All styles of trading are accepted - there are no limits for Expert Advisors (EA)
- With IBEX CFD trading, you can participate in the stock market both up and down.
If you are interested in starting to trade CFDs on indices, you can click on the following banner and open a live trading account now:
Other articles that may also interest you:
- Investing in the EuroStoxx Index
- Investing in Shares for Beginners - A complete investment guide
- How to Open a MetaTrader 5 Demo and Live Account
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