NASDAQ 100 Trading

The NASDAQ 100 is an index that traces the 100 largest companies on the NASDAQ exchange, and for inclusion, securities must be solely listed on the NASDAQ. NASDAQ stands for the “National Association of Securities Dealers Automated Quotations”.

The NASDAQ 100 can be composed of any companies except for those from the financial industry, such as commercial banks. Two considerations for addition to the NASDAQ 100 are market capitalization and liquidity.

The NASDAQ 100 was launched on January 31st, 1985, alongside a second index called the NASDAQ Financial 100, which was composed of companies from financial sub-sectors such as banking, mortgages, insurance and brokerages. The NASDAQ 100 itself was to be the non-financial index created by the NASDAQ stock market in response to the dominance of the New York Stock Exchange (NYSE) at the time.

The first occurrence of foreign companies being included in the index was in 1998, and while today foreign and domestic companies both have to meet the same standards for inclusion into the NASDAQ 100, from 1998 to 2002 foreign companies had to meet significantly higher standards than domestic companies.

The NASDAQ is one of the largest and most well-known stock exchanges in the world, and traders flock to the NASDAQ 100 because historically in bull run years it has consistently outperformed other indexes such as the Dow Jones and the S&P 500.

The NASDAQ tracks some of the largest non-financial companies in the world, with the US economy being the largest on the planet, and the NASDAQ representing one of the global hubs of finance and commerce. The NASDAQ maps the progress of the US marketplace, and acts as an indicator to the state of the world’s economy.

The NASDAQ 100 is a market capitalization-weighted index. What this means is that the index value is calculated by multiplying each of the securities’ last sale price by the total value of their outstanding shares, and then weighting that in relation to each of the other securities in the index.

Larger companies by overall market value hold a larger weighting within the NASDAQ 100 index. The total amount is then divided using a divisor which serves to make the reporting and analysis of the index more manageable.

The NASDAQ 100 is a stock index rather than a single company stock which means that the growth of the index is pushed along by a hundred companies. For traders, this means the risk is mitigated as one company’s poor performance won’t impact the index too much, and when there is a growth in macroeconomic factors, most of the top companies will benefit together.

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