The Nasdaq is one of the most widely followed stock indices in the world, along with the Dow Jones Industrial Average and the Standard & Poor’s 500. The Nasdaq has a unique composition as an index of technology companies, as it includes the 100 largest technology companies in the US market, including young companies with evolutionary dynamics.
The Nasdaq index is considered among the indices with high volatility, as it is characterized by larger movements compared to other large indices such as the Dow Jones or the Standard & Poor’s 500. This is partly due to the nature of risky assets, especially technology stocks, which attract speculative capital. The dynamics resulting from technology adoption across continents add to this volatility. Despite the risks associated with trading the NASDAQ, it is very popular around the world. In this context, we will take a look at what the Nasdaq index is, how to start trading it, and when is the ideal time to be interested in trading it.
What is the Nasdaq index? NASDAQ is the second largest stock exchange in the world, second only to the New York Stock Exchange (NYSE). Technology giants such as Apple, Google, Microsoft, and Amazon are listed on the Nasdaq. Nasdaq was founded in 1971 and since then the number of companies listed on Nasdaq has grown to nearly 4,000 listings, including many of today’s largest companies. The value of all these companies of course fluctuates with the global economy, so the price of the index fluctuates as well.
The ticker name (NASDAQ) is an abbreviation for National Association of Securities Dealers Automation Quotation and refers to the origins when the exchange was founded by the National Association of Securities Dealers (NASD), the predecessor of the current Financial Industry Regulatory Authority (FINRA).
Nasdaq 100 Index How does it work?
The Nasdaq 100 is an index that measures the performance of the 100 largest technology companies in the American financial market. This index is used to track and evaluate the performance of these companies and to give a snapshot of the market situation in the technology sector and related companies. Here’s how the Nasdaq 100 works:
- Selection of companies: The 100 largest technology companies on the Nasdaq market are selected to compose the index. These companies are selected based on certain criteria such as market size and daily trading.
- Weight distribution: The weight is distributed among these companies based on their market value, with each of them receiving a weight percentage that reflects its role in the market.
- Value Calculation: The value of the Nasdaq 100 Index is continuously calculated during trading periods based on the current stock prices of listed companies.
- Continuous updating: The index value is continuously updated during trading sessions, reflecting changes in the stock prices of its constituent companies.
- The influence of large companies: Since the weight is based on market value, large companies play an important role in determining the movement of the index.
- Investment use: Investors use the Nasdaq 100 Index as a tool to measure the performance of the technology market and make their investment decisions based on its movements.
In this way, the Nasdaq 100 index shows an immediate picture of the state of the market’s leading technology companies and reflects value changes in the sector over trading periods.
The composition of the NASDAQ-100 index changes of course in the event of delisting (transfer of listings to another exchange, mergers, acquisitions, bankruptcy, exclusion from the index by NASDAQ due to non-fulfillment of requirements), and the index is also rebalanced once a year in December.
Nasdaq 100 index and trade types
The Nasdaq 100 is a financial index that measures the performance of the 100 largest technology companies on the Nasdaq market. Since it is an index, trades linked to it are made through many financial instruments. Here are some trade types associated with the Nasdaq 100:
- Contracts for Difference (CFDs):
- Investors can trade on the price movement of the Nasdaq 100 without having to buy or sell actual assets.
- CFDs allow investors to use leverage to increase the effectiveness of invested capital.
- Buy and sell options:
- Investors can buy call options if they expect the Nasdaq 100 Index to rise in value.
- Put options can be purchased if they expect their value to decline.
- Options provide opportunities to profit from market movements without having to purchase the asset outright.
- Forex trades:
- Investors can also trade the Nasdaq 100 index through Forex trades, as these trades can be linked to the US dollar.
- The Forex market allows traders to have broader access to global market movements.
- Index Funds:
- Exchange-traded funds (ETFs) are one of the popular ways for investors to gain exposure to the movement of the Nasdaq 100 Index.
- Futures:
- Investors can trade futures contracts on the Nasdaq 100 index, where the assets are agreed to be delivered at a later date at a specified price.
These instruments vary in level of complexity and risk, and the choice of transaction type depends on the investor’s goals and level of risk appetite
Long positions on Nasdaq
A long position (buy) is extremely popular when the market is in a good mood and investors feel safe or when there are external conditions that can bring positive sentiment back into the market. This happens when the rebound is particularly dynamic.
Nasdaq 100 Index and the best time to start trading Nasdaq
The Nasdaq tends to have much larger movements than other US indices due to the nature of the companies included in it. These companies are mostly technology companies, some of which are on a profit-only path, just as companies like Tesla or Amazon have been on this path for many years. For this reason, investors usually leave risky assets in periods of panic or unstable situations in the world for some time and resort to more stable investments or funds.
However, the index is vulnerable to a very dynamic price bounce when positive sentiment returns to the market. This could be due to macroeconomic factors that make investors return to investing in technology that drives human development. Meanwhile, the Nasdaq lists many transparent and ambitious companies offering innovative solutions. So it’s no surprise that capital is so keen to return to technology stocks, which are inherently more volatile than bank stocks or companies in the industrial sector.
Technical analysis of the Nasdaq index today:
The Nasdaq index declined today after the release of news about the Producer Price Index, which, despite its positive result, declined today by approximately 250 points. After a three-day climb.
