The Nasdaq Stock market is an American stock exchange. It currently stands as the second largest exchange in the world by market capitalisation. This page will detail how it operates, including trading hours, performance, and rules. It will walk you through how to start day trading on the Nasdaq, from online trading platforms to charts, graphs, tickers, and strategy. Finally, it will offer invaluable trading tips to set you on the path to attractive earnings.
What Is The Nasdaq?
The straightforward definition – Nasdaq is a global electronic marketplace, where you can buy and sell securities. It also stands as a benchmark index for US technology stocks. The term ‘Nasdaq’ is often used in reference to the Nasdaq Composite.
This is an index of over 3000 listed stocks listed on the Nasdaq Exchange. Of the top dozen or so components, you will find some of the worlds most infamous and influential businesses, from Google (GOOGL) and Amazon (AMZN) to Uniqure (QURE) and Wynn Resorts (WYNN).
As of June 2015, the Nasdaq Stock Market had achieved an impressive annual growth rate of 9.24% since it opened in February 1971. However, since coming out of the rescission in June 2009, it has increased by around 18% per year.
Related Nasdaq Indices
On top of the well known Nasdaq-100 index, there also exits other important lists within the Nasdaq umbrella. These include:
- Nasdaq Q-50 – The next fifty ranked stocks to enter the Nasdaq-100 form this index.
- Nasdaq-500 – This index tracks the 500 largest stocks on the Nasdaq.
- Nasdaq-400 – This list consists of the next 400 stocks not included in the Nasdaq-100.
- Nasdaq-100 Tech – The Nasdaq-100 has been further divided into two sub-indices. As the name suggests, the Tech-100 follows those companies in the technology sector.
- Nasdaq-100 Ex-Tech – This is formed of constituents who are not technology companies. Here you will find some of the world’s largest E-commerce businesses and retailers, including eBay and Amazon.
Nasdaq OMX 100 Index
This list is comprised of the 100 largest companies listed on the Nasdaq OMX group exchanges in the United States and the Nordic countries. Since it was introduced in March 2008, it was poised to be a global index, listing in both US dollars and euros. Calculations are listed in real time and stocks include heavy hitters such as Cisco and Danske Bank.
Nasdaq Composite Index
Here you will find a market capitalisation-weighted index with around 3,000 popular equities that are listed on the Nasdaq Stock Exchange. Commonly listed securities include:
- Real estate investment trusts (REITs)
- American depositary receipts
- Debenture securities
This index is different from others in that it is not restricted to companies that have US registered headquarter addresses. Companies base locations can span across the world.
The index’s value equals the total value of the shares weights of each constituent security, multiplied by each security’s last price. Then, the total is modified by dividing by an index divisor. This amends the value to a more straightforward figure for reporting and broadcasting purposes. This calculation is reported each second and a final value is announced at 16:16 each trading day.
Nasdaq 100 vs Nasdaq Composite
Both indexes are commonly confused with each other. The Nasdaq Composite is often referred to as just ‘The Nasdaq’ and is quoted more in the mainstream media than the Nasdaq-100.
However, it is important to point out some crucial differences between the Nasdaq Composite and the Nasdaq-100. The Composite includes around 3,000 stocks that are traded on the Nasdaq exchange. Whereas, the Nasdaq-100 is a far smaller, subdivision, that includes around 100. The Nasdaq-100 is responsible for 67% of the total market capitalisation of the Nasdaq Composite.
The Nasdaq-100 is a modified capitalisation-weighted index. This methodology, created in 1998, enables Nasdaq to limit the impact of large companies, affording greater diversity.
The Nasdaq Stock Market sessions in eastern time are:
- 04:00 to 09:30 – premarket session
- 09:30 to 16:00 – normal trading session
- 16:00 to 20:00 – postmarket session
It is 14:30 to 21:00 for those looking for the Nasdaq normal trading hours in GMT. This means for day traders in the UK or Europe, a significant part of the trading day will take place in the afternoon. Also note, trading can get choppy around 17:00 to 19:00 GMT when it is lunchtime in the US.
Over time Nasdaq has introduced an array of demanding requirements that companies must meet in their listing application before they can be included in the index. Some of the most important standards are as follows:
- A company must be listed on Nasdaq in either the Global Select or Global Market tiers.
- The constituent must have an average daily volume of 200,000 shares.
- A company needs to be publicly offered on an established American market for a minimum of three months.
- The component must submit both quarterly and annual reports.
- They must be free from any bankruptcy proceedings.
- Companies with multiples classes of stock can have numerous classes included in the index. They do have to meet the Nasdaq criteria, however. This change was introduced in 2014.
Nasdaq velocity and forces see to it that the list of Nasdaq companies changes regularly. Delisting can occur when constituents declare bankruptcy, merge, transfer to another exchange, or fail to meet application listing requirements.
Apart from that, rankings are only changed once a year, in December. Nasdaq makes this determination using two factors:
- Share prices on the last trading day in October.
- Publicly announced share totals on the last trading day of November.
Constituents ranked 101 to 125 only remain if they made the top 100 of the previous year’s annual review. Companies that fail to move into the top 100 in the next year’s review, will automatically be dropped.
When a company doesn’t make the top 125, they are demoted, regardless of their previous year’s ranking. If a company fails to achieve an index weighting of at least one-tenth of a percent after two consecutive months, they will also be dropped.
Uplisting requirements are relatively straightforward. Companies with the greatest market value who do not already feature in the index will replace the losers. It’s worth noting, predictions and forecasts as to who will be this year’s upgrades and movers, can all lead to stock price fluctuations.
A press release announcing changes will be given at least five business days before changes are scheduled to be made. Therefore, 2018 re-ranking results were announced on December 14th. Changes then took place on December 24th.
Nasdaq vs Dow Jones
You will often hear the term ‘the market’ used in discussions about both the ‘Nasdaq’ and the ‘Dow’. This has lead to confusion and a misunderstanding of how the two are different.
Firstly, the famous figure most commonly reported in business news reports is the Dow Jones Industrial Average (DIJA). It provides a strong indicator of how the overall stock market is performing.
The problem is, both terms refer to an index or average data derived from price movement within certain stocks. When you hear people saying ‘the Nasdaq is down’, they are referring to the Nasdaq Composite Index.
The DIJA tracks the performance of just 30 companies who are thought to be the major players in their respective industries. The Nasdaq Composite, however, tracks around 3,000 to 4,000 stocks listed on the Nasdaq exchange.
The DIJA is primarily concerned with companies on the NYSE and includes only a few Nasdaq stocks, such as Apple (AAPL), Cisco (CSCO), and Intel (INTC).
So, despite both referring to market indices, only the Nasdaq refers to an exchange where you can actually purchase and sell stock. However, strictly speaking, you cannot trade the Dow or Nasdaq indices. The indexes are just mathematical averages used by individuals to paint a clear picture of the stock market. What you can do, however, is purchase 100 index funds or exchange-traded funds, which are securities that track the indexes.
So, who are the greatest movers and shakers that dominate the Nasdaq? Below you will find ten of the current heavyweights, their market capitalisations and 100 tickers.
- Apple Inc. (APPL) – $890.23 billion
- Google Inc. (GOOGL) – $771.43 billion
- Microsoft Corporation (MSFT) – $680.35 billion
- Amazon.com Inc. (AMZN) – $592.29 billion
- Facebook Inc. (FB) – $542.95 billion
- Intel Corporation (INTC) – $209.38 billion
- Cisco Systems Inc. (CSCO) – $195.45 billion
- Comcast Corporation (CMCSA) – $191.81 billion
- Pepsico Inc. (PEP) – $168.77 billion
- Amgen Inc. (AMGN) – $131.14 billion
All of the above boast massive net worths. Although, if you want to day trade any of these stocks, it warrants a careful strategy, as competition and risk are high. Your timings need to be accurate, as yesterday’s Nasdaq trading halts and patterns may not repeat today.
Why Trade The Nasdaq?
Forget dividend stocks, mutual funds and leveraged ETFs for a minute. What, if any, are the main reasons to focus your trading attention on the Nasdaq?
- Volatility – Because the Nasdaq-100 consists of some of largest technology firms in the global marketplace, it’s a fantastic opportunity for those who want access to substantial price fluctuations and growth stocks. It may mean you don’t have to research every stock individually. Also, plenty of brokers now offer a volatility index.
- Technology heaven – For tech enthusiasts, the Nasdaq is a safe space to pursue your passion, free from the noise of financial companies.
- Attractive vs other markets – Compared to other indices, the Nasdaq promises a rich and plentiful hunting ground, full of volume and volatility.
- Diverse trading vehicles – Some people believe trading shares to be more complex than dealing with forex, commodities, plus futures and options. However, take forex pairs, for example, you are restricted to a limited number of liquid trading instruments. With stocks, on the other hand, you can choose between a multitude of trading vehicles. This results in greater opportunities to generate earnings.
- Transparency – US markets, on the whole, are often more transparent than other countries. Strict regulation, oversight and federal exchange rules are making the Nasdaq market a relatively clean pond to dip your trading toe in.