Trading NASDAQ 100
The Nasdaq is a benchmark index for US technology stocks and a global electronic marketplace for buying and selling securities. The term Nasdaq that is also referred to the Nasdaq composite, which is an index of over 3,000 stocks that are listed on the Nasdaq exchange. This exchange in particular includes the globe’s forerunners in technology and biotech such as Microsoft, Google, Oracle, Intel and Amazon to list a few. However, there is a difference between the Nasdaq composite and the Nasdaq 100 which is made up of 100 largest nonfinancial companies listed on the NASDAQ exchange.
Both are market capitalization-weighted indexes that are made up of both US based and international stocks that represent the NASDAQ Global Select Market Composite. These stocks need to meet the strict liquidity requirements and need to adhere to corporate governance standards.
What is the Nasdaq 100?
NASDAQ 100 History
Nasdaq 100 was launched on 31 January 1985, by Nasdaq and started off with two separate indices: The NASDAQ-100 consists of retail, technology, telecommunication, health care, transport, etc. and the NASDAQ Financial-100 which consists of banking, insurance firms, mortgage and brokerage houses. By creating two indices the NASDAQ wanted trading options and futures contracts would be created on their basis in the hopes that other mutual funds would adopt the same principles on their benchmarks.
The base price of the index was set at 250 and closed at 800 on the last day of December 1993, the base was reset at 125 on the 1st of January 1994 leaving the NASDAQ 100 price below that of the more popular NASDAQ Composite.
The all-time highs for the index were welcomed by the dot-com bubble that was in 2000 where they stood above the 4,700 level. In 2002 the markets started evolving to the recession and the September 11 attacks and the Afghan War, that saw the index drop to the 900-point level during this period. The recovery took 5 years and eventually the index corrected itself on February 16, 2001 and high of 2,239.51-point level. The Late-2000s recession the US saw the housing bubble and Global Financial Crisis of 2008, with a correction at below 2,000-point level. While the Nasdaq 100 also experienced a limit down on the 24th of October 2008, and as a result on November 20, 2008 the index reached a 6-year intraday low of 1,018.
The Quantitative Easing (QE) from the Fed (Federal Reserve) was what brought in the end of the financial crisis, the index started on a volatile four-year climb, and on May 15, 2013 closed above 3,000. Thanks to GOOG (google Inc.) on the 18th of October 2013, the index closed at a high of 3,355.63 as each Google’s share was sold for more than $1,000. Finally, the index reached 4,593.27 as 2015 came to a close.
NASDAQ 100 Index composition
The Nasdaq 100 includes 100 of the largest domestic and international non-financial companies listed on the Nasdaq Stock trading Market, and is calculated based on modified market capitalization-weighted methodology. Every quarter the Nasdaq will be reviewed, and the composition of the Nasdaq 100 index weightings are adjusted according to its components by means of a proprietary algorithm, and if the composites do not meet pre-defined weight distribution requirements they are excluded.
|Companies||Index weighting (%)|
|Cisco Systems Inc||2.7%|
Factors that influence the overall index price
It is always handy for traders to follow the PMI (Pre-Market Indicator), as it predicts opening prices based on closing price of the last sale from the pre-market trade. This PMI also takes into consideration overnight news, hence assisting traders in market predictions.
As opposed to broader market indices like Russell 2000 index, the main factors that influence the Nasdaq stocks are heavily skewed towards the technology sector. The stocks are more volatile and change direction quickly.
Another wise move is to monitor the dollar index that reflects USD strength, which affects the American companies.
NASDAQ 100 Trading information
- The NASDAQ 100 futures contract (called the E-Mini) is tradable from 22:00-20:14 & 20:30-20:59 (GMT), Monday to Friday
- The Nasdaq-100 price moves in increments of 0.25
- The minimum trade size is 1 unit
- The currency of the Nasdaq 100 is the US Dollar
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Nasdaq Trading Main FAQs
- What is the Nasdaq 100 Index?
The Nasdaq index is composed of the 100 largest and most actively traded stocks on the Nasdaq exchange. Because the Nasdaq exchange does not include financial companies, and is heavily weighted towards both technology and health care, the Nasdaq 100 is often considered to be a benchmark for the strength of the technology and health care industries. Because many of the companies listed on the Nasdaq are high growth the Nasdaq 100 has delivered strong returns over the past two decades.
- Should I trade the Nasdaq 100 Index?
Anyone interested in speculating on the growth of the technology industry should be interested in trading the Nasdaq 100. With over 50% of the index comprised of technology names the index is an excellent proxy for the technology sector. Plus, as one of the most closely followed indices in the world, there is a wealth of knowledge regarding trading the Nasdaq 100. Both fundamental and technical analysis of the index is commonplace and easily found, which will make your own analysis easier.
- What is the best strategy for trading the Nasdaq 100 Index?
Traders can use either technical or fundamental analysis to trade the Nasdaq 100. The best strategy will depend on the trader’s own personality and knowledge regarding the strategy chosen. In the realm of technical trading there are a number of indicators that can work well in trading the Nasdaq 100, such as moving averages, MACD, RSI, and others. Price patterns such as support/resistance or trend channels can also be useful. Fundamental factors shouldn’t be overlooked when trading either. Major economic factors such as GDP, interest rates, trade issues and more should also be considered.
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