Presentation of Nasdaq and its characteristics:
Although published and quoted in the United States, Nasdaq is not a national stock exchange index. Its initials represent ‘National Association of Securities Dealers Automated Quotations’ and it represents the new technologies sector on an international level.
The Nasdaq was created by the NASD, the National Association of Securities Dealers (currently known as the FINRA), in 1971 to respond to the major advances in the electronics sector that demanded a dedicated market separate from the global economical markets. Nowadays Nasdaq is the major digital electronic stock market in the world.
It is actually on Wall Street that Nasdaq is quoted. This index is in fact the second most important on this major stock exchange with impressively high trading volumes.
The volatility observed on the Nasdaq is among the highest on the markets, this makes it extremely advantageous when you wish to speculate on an asset using Day Trading or over the short term.
How is the Nasdaq calculated?
The Nasdaq Index is calculated from all the companies registered on the Nasdaq Stock Market which is different to the other major indices that take into account only a certain sector on the registered companies. The Nasdaq is therefore a very precise global index.
Of course, the importance attributed to each of these companies in the final calculation of the Index differs according to the stock capital of each of them. It is important to note that the share prices of companies in the technological sector are far more volatile than those of companies quoted on the general Stock Market.
The history and evolution of the Nasdaq
The history of the Nasdaq follows the technological evolution of these last years with the arrival and following development of the Internet and its numerous types of media that enabled this index in the beginning to beat all records relative to an increase.
However the bursting of the Internet bubble in 2003 caused a decisive drop in this value and the Nasdaq lost points when the announcement was made concerning the separation of Microsoft into several distinct entities.
Nowadays, the Nasdaq continues to rise on a global trend with the entry onto the market of new companies that are also specialised in new technologies. It is fairly easy to foresee future movements by following this market closely.
Some advice for trading on the Nasdaq:
There are various methods of trading on the Nasdaq, one of the most popular is trading using CFDs offered by numerous brokers that enables the opportunity to make profits on the rise, and on the fall, of the price. In that case you simply have to anticipate the rising or falling movements of this market. Of course, an analysis of the 100 companies quoted on this index would be far too time consuming, particularly if you are an individual trader. It is therefore far more practical and judicious to complete your analysis based on the global results of the new technologies and electronics activities sector.
Of course, it is still extremely useful to follow the news and results of the large global companies in this sector that exert a strong influence on the prices, like that of the movements of the American economy that equally influences the movements of the Nasdaq.
Finally, the historical movements of prices enable a more advanced approach of the fundamental analysis. By studying the past reactions of this index to precise events you will better be able to understand how it may react to future events.
Let us end this article with some advice regarding technical analysis. The movements of this index are often highly volatile and therefore also voluminous. It can therefore be profitable to trade on the support and resistance levels when you identify a strong trend but do not forget to combine the results obtained with those from a fundamental analysis.
What are the indicators to follow when trading on the Nasdaq?
It is evidently just about impossible for any trader to follow the movements of all the shares included in the Nasdaq in order to predict coming values. However, certain American indicators that concern the IT sector can be sufficient to use in order to predict movements.
Of course, it is primordial that you pay careful attention to the economic and financial results of the large American technological groups that act as good indications of the financial health of this sector. This is the case for example with Microsoft.
The American economy is also often reflected in the movements of the Nasdaq and so can therefore be an important indicator for trading purposes.
With CFDs you can speculate on the future price of the Nasdaq Index and try your hand at making a profit on anticipating the rising and falling trends of this market. You can of course find this Index price on the trading platforms of all major online brokers that generally offer daily or weekly analyses of this market.