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Everything about the NASDAQ Stock Exchange

This is the 2nd biggest exchange of securities throughout the globe, which is only tanked behind NYSE. Trade takes place on NASDAQ in an electronic form via dealers instead of a physically located area between traders. Generally, this exchange attracts technically growing and oriented businesses when coated to any other kind of exchange. If an investor purchases equity, such an investor is opened to a wide range of trading options on the NASDAQ.

Set up as an electronic trading place for securities, Nasdaq was formed by the National Association of Securities Dealers. They set it up with the primary aim of giving investors an online trading ground that was easy, fast, and open transactions can be made. Since 1971 this is exactly what Nasdaq has done. As of date, the index boasts of over three thousand stocks listed on its exchange board.

Nadaq index with technical indicators in a daily chart

In 2006 the index officially became its entity. Separating from its founders, NASD became a national securities exchange. The next year it joined itself to the Scandinavian exchange group called OMX and took on the Nasdaq OMX group.

This group officially become the largest global exchange company. It is headquartered in New York and operates 25 markets. They primarily trade equities and are open to options, including derivatives and commodities. 

Why the interest in NASDAQ?

Unlike other exchange forms, NASDAQ uses no visible location or floor where trading activities occur. While many exchanges engage in viable stock trading, NASDAQ trades its stocks in electronic form using auto-computer networks, having this as its aim right from the onset. 

To individual grown-up blue-chip companies located everywhere globally, NASDAQ is an attraction to them since it trades electronically. Most of the equities represent companies thriving on the internet, high-technology software, and more.

However, specific industries also execute electronic trading on NASDAQ. There are lots of large company’s major stocks on NASDAQ.

nasdaq index at key support in consolidation phase
Trend Analysis

Some of them include Tesla, Apple, Amazon, and lots more. Since NASDAQ is an attraction of positively oriented companies and growth, there is more volatility than other exchanges. Being the 2nd largest stock exchange as a result of market cap, listed stocks are traded on NASDAQ, with over-the-counter stocks. Alternatively, NASDAQ is a specific reference to the composite of NASDAQ.

It is an index fund of the market, just like other exchanges (such as Dow), specially created to follow the NASDAQ general trends.

NASDAQ Bigtech companies dominate nasdaq 100
This picture is from: statista.com

However, these points are not the primary reasons why the Nasdaq OMX is thriving and ranking as the top exchange company.

It is because of their high-grade technology, which offers trading at its maximum. 70 other exchanges issued this technology in over 50 countries of the world. 

It is so important that the technology itself is listed under Nasdaq and has been in the S&P 500 for over a dozen years.

Strangely enough, this system was created at the start as an alternative to the specialist system, which was highly inefficient. Now, this technology is not only surpassing its predecessor tech; it is now a standard for electronic trading worldwide.

NASDAQ-How It Works 

From the onset, this index was formulated for the provision of auto-quotations. Some years after it was founded, it became a timely facilitator of trading over-the-counter.

As a result of this, investors first termed NASDAQ as an OTC market, even in trade publications. Some years later, the automated trading system was included, which could help create trade and reports of volume.

This turned out soon after to be the foremost exchange to provide investors with the ability to trade online. Since it’s a market of dealers, every trade carried out over the NASDAQ’s electronic business is executed via dealers.

This index is also known to be the markets’ makers since trade executions are not done directly through auctions. Typically trading in Nasdaq follows a strict schedule.

This is set in the Eastern Time zone. From 4 am to 9:30 am, the extended hours or premarket trading sessions begin. From 9:30 am to 4 pm, normal trading goes on. From 4 pm to 8 pm, the extended trading session or post-market hours commences. The Nasdaq stock market trades at an average of 253 days in a year.

 Why should you invest in NASDAQ?

As an investor or prospect trader, are you worried about putting your cash in the market, even at this difficult time?

Getting worried is normal, especially now there is more volatility in the stock market. However, while you may be contemplating whether to delve into the market with both feet, here are some good reasons you should invest in the NASDAQ.

Online Automation

NASDAQ offers traders automated trading activities even from the most comfortable part of their home through its exchange of internet trading. Investing in this index helps eliminate the need to provide trade on behalf of the trader.

Instead, a trader has the option of choosing when buying and selling can be done on their own. Unlike specialists of NYSE, this index’s maker of markets is available to provide liquidity. However, not all trades are being managed.

NASDAQ Automated strategy with signals

Auctions-Opening and Closing 

One of the reasons to invest in the NASDAQ is the precise auctions’ opening and closing. A trader who invests in NASDAQ can be dependent on the assurance that the precise opening of the market will be 9:30 am, while expert traders who use the day’s close for standardizing the price of the stock are informed that they can be dependent on the 3:50 pm cut off time for being involved; by 4 pm, the market becomes closed, however, entered trades after the auction’s closure happens at 3:50 pm and are seen as after-hours. Traders dependent on personnel-driven exchanges have to pause till the books can be closed by an expert. With this, there tends to be a greater probability of human mistakes than with the NASDAQ exchange.

The caliber of companies and trading opportunities

Generally, for tech companies or companies into AI and other cloud-based or internet-based operations and services, the Nasdaq is an excellent trading ground.

It flows better with them, and it would be easier to work with the technology and trading system. It isn’t completely a bust; however, Nasdaq can serve as a fantastic place to build a ground with the rising market.

For every company, there is more benefit to joining the Nasdaq than not joining it. In this light for any trader, the Nasdaq is a depot for companies with a grand future in technological advancement.

Investment opportunities vary, and the results, although with risks, have more potential for success. If the tech world is moving this fast, what is to say that one company within the Nasdaq will not become the next billion-dollar company. 

Companies in NASDAQ

Being an index of stock markets, there are 100 of America’s largest operational trading companies in the NASDAQ. These companies are in a sector of non-finance, having their segments under transportation, tech, industries, and lots more.

For sure, all companies listed under Nasdaq have a grander potion to become the next top tech or tech-oriented business. Keeping this in mind, there are over 3,000 companies under the Nasdaq meaning a large field of choice. 

Investors on the Long-term

Yearly, the NASDAQ 100 has experienced continuous growth, according to historical charts. Although different economic crises, including trends of bear markets, have rocked the stock market, this index has always stood firm and is not relenting in gaining momentum.

When investors acquire lots of shares while there is market-crash like during the pandemic period, it earns them lots of opportunity in the long-term. For a long-term investor, there is a field of opportunity for you.

Most companies listed under them are companies with a thriving future in the tech world; hence for a long-term investor, you can easily invest in a growing company with a growth margin or prediction of 10 to 20 years.

Within this time, your position and benefit within the company would be substantial enough to earn you good retirement money. 

Benefit for investors who are seeking a diversified-portfolio 

Investors who choose to invest in NASDAQ 100 can quickly diversify their money since the index contains many large companies with huge market-cap.

Being an excellent means for diversification of investment, you can easily find companies in all fields or sectors of the economy, reducing the risk of total investment loss. 

Benefit for investors who are seeking innovation and emerging markets-driven 

Based on the readiness to grow and innovate, the companies in NASDAQ are selected with care. The companies consisted of the index are all with massive potential for innovative ideas.

Suppose you are an investor driven by innovation and tech while having confidence in companies gearing forward to Netflix or Facebook impacts. In that case, the NASDAQ is a perfect index for you. 

NASDAQ-what differentiates it from other major stock Indexes?

The index of the NASDAQ market, also called composite of NASDAQ, is responsible for tracking approximately three thousand companies that engage in trade activities on the exchange of NASDAQ. This does not always happen because no other exchange owns its famous index. For instance, there is no composite of NYSE.

The NASDAQ composite has expanded more famously due to its general acceptance as a global indicator standard. They act as a yardstick for determining how sectors or companies that are into tech and innovations, including the large and the small ones, are doing in the market.

The NASDAQ index, just like the rest indexes, employs a weighted strategy for the calculation of its value. There is a constant update of it throughout the day; however, any value taken into the record at 4:16 pm Eastern Time is the record value every day. 

A significant differentiation from the other indexes is probably a complete online trading feature that sets the world in a new motion. 

Shorting the NASDAQ, what does it mean?

Shorting is strategic trading that enables the investor or traders to take advantage of a fall in assets’ value. As an investor, shorting can be done when you borrow assets from a broker to get them sold, and after a while, hoping to re-buy them at a cheaper cost. Specifically, investors famously short stocks when there is a stock s down. An example of this is the crash of the market as a result of the pandemic. 

How to short the NASDAQ

Various ways are available for investors for the shorting of the NASDAQ. However, the most widely adopted strategy for an average trader is to invest in inverse ETFs. 

NASDAQshort

Investing in inverse ETFs

Inverse ETFs help in the tracking of a fundamental index like NASDAQ. However, rather than following it closely, its movement is in the opposite direction. Therefore, it can be concluded that if NASDAQ were to a 2 percent value rise, there would be a reduced value of 2% of the ETF tracking it.

Traders commonly invest in this for acquiring returns within a short space of time. This is why they can refer to them as “ultra-short funds”. As an investor, you can get the inverse ETF leveraged. With this, you can be given 2 or 3 times what you are exposed to that you get as usual.

However, it would help if you understood that leverage is to borrow effectively. Therefore, there are tendencies that you have more losses of what you have invested initially with this same strategy. Knowing the risk involved is very important. Investors can also short the short NASDAQ by taking a short position with the use of derivatives. It enables investors to be postponed on a specific stock without being the owner. 

Conclusion

The Nasdaq is an index that every company strives to set its flag in. Their high standards for entry on their list are among the reasons people trust them to offer potentially successful companies to invest in. For new investors, the Nasdaq is a great place to start to find the right company for you. 

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