The IBEX 35 is an index the comprises the 35 most liquid companies in the Spanish Interconnected Exchange System, which integrates Spain’s four exchanges: Madrid, Barcelona, Bilbao, and Valencia. Technically it is a price index, weighted by capitalization and adjusted by the floating capital of each company in the index.
Does this mean that the companies that comprise the index are the biggest in Spain? Not necessarily, as the companies are not picked basis their size, despite there being a minimum market capitalization requirement in order to be included in the IBEX 35. Many large companies that trade publicly and in large quantities are included in the index, but this is based on the liquidity of their shares and not their size.
How is this liquidity measured?
The Technical Advisory Committee takes into account for each company the effective volume traded on the main market, provided that this effective volume meets quality guarantees in its execution.
How often are companies removed/added from the index?
Every six months the committee reviews the 35 most liquid companies in the Spanish stock market, and there is no minimum or maximum number of changes to be made with respect to the previous period, resulting in no changes or as many changes as appropriate in order to respect the liquidity measurement. In the history of the index, up to 5 values have been changed in one revision, and on other occasions, no change has been made.
Sector weightings
Among the criteria used for a company to form part of the IBEX 35index, the economic sector to which the company belongs is not taken into account under any circumstances, as the IBEX 35 index does not require any specific sectorial diversification in its composition.
The 10 companies with the largest weighting on the IBEX 35
- Iberdrola (IBE) – 17.91%
- Indústria de Diseño Textil (ITX) - 11.26%
- Banco Santander (SAN) – 11.03%
- Banco Bilbao Vizcaya Argentaria (BBVA) – 6.43%
- Amadeus IT Group SA (AMS) – 5.82%
- Telefónica (TEF) – 4.32%
- Cellnex Telecom SA (CLNX) – 4.29%
- Aena SME SA (AENA) – 3.80%
- Ferrovial SA (FER) – 3.62%
- CaixaBank SA (CABK) – 3.13%
Data as of January 11th 2021
The weightings of its top 10 listings mean the index is more exposed to its domestic market than other indices, with finance and utilities making up 50% of the benchmark, which means the performance of the IBEX 35 is largely a function of how banks and utilities are performing in general across Europe.
History of the IBEX 35
The IBEX began trading on January 14, 1992, but historical data was calculated as of January 5, 1987. The day chosen as the basis was December 29, 1989, when the base value was established at 3000. Since then its value has fluctuated non-stop, reaching a maximum of 15,945 in November 2007 and a minimum of 1,873 points in October 1992. If we had bought at the minimum and sold at the maximum our investment would have a multiple of 8.5.
How to trade the IBEX 35
Trading the IBEX 35 is very similar to trading other financial assets and there should be a consistent strategy throughout.
If you trade with IG, you can find the IBEX in the indices dropdown under the name “Spain 35”
Here’s our top IBEX trading strategies and tips:
- Decide your entry level, exit point and stop loss. Note: Traders should be aware of risks to stop loss orders. They are vulnerable to short-term fluctuations in price that could activate the stop price. All stop orders will be filled, though there is no guarantee of the price. What’s more, if your level is reached, your stop order cannot be filled at a better price than your stop, only the same price or worse, and this could impact your original risk-reward ratio. If you are using technical analysis to decide levels to trade the IBEX, make sure you have rigorously tested your analysis before trading and that you are comfortable entering the position.
- Entering trades before major data releases is risky and should be avoided. It is better to let the ‘dust settle’ after a release and miss a small part of the move than to gamble that the data release will be good or bad for the market.
- Do not place a trade - either a long or a short - without placing a firm stop loss.
- Before entering a trade, decide your risk-reward; for example, risk one unit to make three units. See our traits of successful traders research for more detail as to why.
- Do not place a large percentage of your capital on any one trade, however strongly you feel about it. At DailyFX we suggest limiting your exposure to less than 5% risk on all open trades.
- Select your timeframe for the trade, such as one hour, one day, one week or several weeks.
- Make sure that you are in a ‘good place’ before trading the IBEX. Do not trade when you are tired, distracted, emotional or bored.
- Record all your trades comprehensively, making sure that you note why you entered the trade, how you felt, how the trade played out and the final result. The more you record your trades and their outcomes, the better prepared you will be for your next trade.
- Trading is like a full-time job and should be treated like one. Constantly study and update your trading technique.
- There are a variety of financial products available to trade. Traders should use a practice account test run various products to find where their strengths and weaknesses lie.
- And remember to enjoy it!
If you wish to practice your trading strategies you can open an IG Demo account. To stay up to date with live price movements visit our DAX 30 page, and download our free quarterly Equities Forecast to better understand future trends in the market.
