Nasdaq is a very popular trading instrument in line with others such as S&P 500. What is it, why do traders like it, and how to trade it? Let’s find out.
What is it?
Each stock market has a set of indices that indicate the overall status like “How are stocks doing, in general?”. Nasdaq Stock Market has its indices, too. There are two main ones of the set: Nasdaq Composite Index and Nasdaq 100 – the second one is the one you have in MetaTrader and FBS Trader.
What makes it different?
Almost half of the companies included in Nasdaq are tech companies. Therefore, Nasdaq is a very hi-tech-oriented index. That’s why, if you’re a fan of engineering breakthroughs, cloud computing, AI, and other subdivisions of the tech sector, this index is for you.
Very importantly, Nasdaq is a market-cap-weighted index. It makes it more balanced and representative of the entire sector instead of reflecting the status of the biggest participants such as Amazon or Alphabet.
Where to find it
In Metatrader (MT4 in the example below), you choose CFD Futures and go for Nasdaq. In FBS Trader, go to the Indices section and find US100.
How to trade it
Generally, any big news relevant to the tech sector will move Nasdaq. That’s why, to trade Nasdaq, you need to follow events on the companies that are in it: Apple, Microsoft, Amazon, Google, Facebook, Tesla, Alibaba, and others. All of them are available individually in both MT5 and FBS Trader so you may find corresponding moves between their individual trajectories and the behavior of the index.
Announcements positive to these companies will move Nasdaq to the upside. It may be an upbeat business outlook for a coming period, better-than-expected earnings report, a promising merger, or an announcement of a new product that’ll open a new market niche or profit potentials for a company.
Conversely, lack of investors’ interest, seasonal funds outflows, or dull projections for the tech sector keeps Nasdaq at the downside.