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.
Nasdaq was founded in 1971 by the National Association of Securities Dealers (NASD). Then the NASDAQ acronym stood for the National Association of Securities Dealers Automated Quotations.
When it began trading on February 8, 1971, it was the first ever electronic stock market. Admittedly, it was simply a quotation system to start with and could not facilitate electronic trades. However, the Nasdaq Stock Market helped to lower the spread (the difference between the bid price and ask price of a stock). This attracted resentment from brokerages who generated much of their earnings from the spread.
As the years have passed, the Nasdaq has become more of a stock market by introducing trade and volume reporting, plus automated trading systems. It became the first stock market in the US where you could trade online. It confidently proclaimed itself “the stock market for the next hundred years”.
The Nasdaq of today is a far cry from the humble beginnings of the early years. It separated from the NASD and in 2006 it started operating as a national securities exchange. The following year it combined with the Scandinavian exchange group ‘OMX’, to form the Nasdaq OMX group.
This move saw the Nasdaq OMX group become a global powerhouse and the largest exchange company and listing center. Today, data shows it powers a staggering one in ten of the world’s securities transactions.
In addition, from its headquarters in New York, the Nasdaq OMX operates in twenty-six markets. The bulk of which, are:
- Fixed income
- Commodities (e.g. gold, copper, natural gas, and WTI oil)
It also boasts three clearinghouses, plus five central securities depositories across the US and Europe. Its sophisticated technology has seen it be adopted by seventy exchanges, in fifty countries. Today its electronic trading model acts as the standard for markets across the world and is explained on every continent. It is perhaps no surprise then that in the technology boom of the 1980s and 1990s, many of the world’s technology titans opted to list on the Nasdaq.
Since 2002 you will see its stocks listed on the Nasdaq with the symbol NDAQ. Also, from 2008, it has been a part of the S&P 500.
The US Nasdaq Stock Market had an important year in 1992. It joined with the London Stock Exchange to create the first intercontinental linkage of securities markets. Then, in 2002, the National Associate of Securities Dealers split from the Nasdaq Stock market to become a publicly traded company.
Below are some more important dates in the Nasdaq timeline:
- March 10, 2000 – The Nasdaq Composite peaked at a record all-time high of 5,132.52.
- April 17th, 2000 – The Nasdaq Composite sunk to a low of 3,227.
- 2007 – Nasdaq merged with OMX, the leading exchange operator in the Nordic counties. This significantly expanded its global reach and influence.
- June 18th, 2012 – Nasdaq OMX became a founding member of the United Nations Sustainable Stock Exchanges initiative.
- November 2016 – Adena Friedman was promoted to CEO, becoming the first female to run a major exchange in the US. Since then, the team and board of directors have enjoyed increasing diversity.
- 2016 – Nasdaq generated an impressive $272 million in listings-related revenues.
Nasdaq Live Price Chart
The main index list is the Nasdaq Composite, which has been published since its creation. It is also worth noting, however, its exchange-traded fund has tracked the large-cap Nasdaq-100 index since 1985. This was published alongside the Nasdaq Financial Index which ranks the largest one hundred companies by market capitalisation.
In terms of performance, the Nasdaq Composite index surged in the late 1990s but plummeted as a result of the dot-com bubble.
In essence, the Nasdaq-100 Index contains the 100 most actively traded US companies listed on the Nasdaq stock exchange.
It is a capitalisation-weighted index. The weight of index-listed stocks are calculated using their market capitalisations, but also by applying specific rules. These rules are designed to limit the influence of the largest constituents. Quarterly Nasdaq reviews will adjust weightings if distribution stipulations aren’t being adhered to.
It primarily contains companies from the following industries:
Facts and figures show the technology sector is responsible for a massive 54% of the index’s weight. After that, consumer services, such as restaurants and retailers take up the next biggest slice. Their size can be partly attributed to the growth of retail giant Amazon.
The smallest slice of the pie is formed by the healthcare industry and telecommunications. However, there remain other big players, such as Vertex Pharmaceuticals (VRTX).
It is also worth highlighting, it does not contain any financial companies, such as investment and commercial banks. Instead, these will be found on separate indices. This distinguishes it from the S&P 500.
The Nasdaq-100 is traded through the PowerShares QQQ trust. This has been formulated to track the performance of the 100 largest listed companies on the Nasdaq exchange. There are certain admission rules that must be met. Each company in the trust has to be a member of the Nasdaq 100, plus be listed on the broader exchange for a minimum of two years. There also exists criteria around liquidity.
Having said that, there are certain exceptions. Admittance can sometimes be granted to newly public companies with abnormally high market capitalisations. On top of that, listed constituents on the stock index must also have an average daily trading volume of 200,000. They must also have publicly reported earnings both quarterly and annually.
If a company has bankruptcy issues, they will be excluded from the PowerShares QQQ trust. You may find at times that the trust and index do not quite mirror each other. However, the objective of the QQQ remains to monitor both the price and performance of the underlying index.
Performance results and new highs are continuously tracked and announced. Currently, the all-time highs are as follows:
- Closing – The value rapidly shot through the first north of 6,500, when a high of 6,653.29 was seen on Friday, January 5th, 2018.
- Intraday – The intraday record high was also on Friday, January 5th, 2018 and was 6,654.98.
These recent results have produced both Nasdaq winners and losers, who have either generated impressive trading returns or suffered significant losses at the hands of volatile stocks.
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.
Put aside the Nasdaq q-50 index ETF for a minute. The Nasdaq Stock market consists of three straightforward market tiers:
- Capital Market (small cap) – This is an equity market, designed for those companies with relatively small levels of market capitalisation. Uplisting requirements are more relaxed in comparison to larger Nasdaq markets.
- Global Market (mid cap) – This consists of 1,450 stocks that form the Nasdaq Global Market. All have to meet Nasdaq’s stringent financial and liquidity criteria, plus corporate governance standards.
- Global Select Market (large cap) – This is a market capitalisation-weighted index, formed of both US-based and international stocks that represent the Global Select Market Composite. The 1,200 stocks must meet rigorous financial and liquidity requirements. They also face uncompromising corporate governance standards. This is the premier tier. Every October, the Nasdaq Listing Qualifications Department reviews the Global Market Composite to ascertain whether any stocks should be up-listed or down-listed to and from the Global Select Market.
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.
How To Start Day Trading the Nasdaq
Before you start punching your potential profits into a returns calculator, you need to make sure you have the essential components outlined below.
Before you start day trading on the Nasdaq you will need to choose a broker. They will facilitate your trades and hopefully provide you with the assistance and tools you need to start generating profits. However, with so many options out there, what should you look for when you’re shopping around for market makers and brokerages?
- Costs – As an intraday trader, making a high number of trades each day, high commission fees can quickly cut into your profits. So, look for a broker with a competitive and transparent fee structure. Also, check minimum account requirements, plus deposit and withdrawal fees.
- Trading platform – You will spend numerous hours a day on your web-based or app trading platform. So, make sure it offers all the charts, graphs, and technical analysis tools you will need. Also, check execution speeds. In day trading, every second costs money.
- Features – Do they offer extended trading hours? Do they collate previous quote history, plus offer useful news feeds and other data resources? All could help give you that all-important edge.
- Customer service – Any issue with your account or platform could cost you serious time and money. Check reviews to ensure you will get fast and reliable support. Many brokers today offer 24/7 support in a number of languages.
The broker you choose will be one of the most important trading decisions you make, so give it thought and do your homework. The right broker can compliment and enhance your trading performance. The wrong broker could quickly see you sink into the red.
For more guidance and brokerage comparisons, see our brokers list.
The cost of day trading Nasdaq stocks can quickly rack up if you do not have an effective strategy. In today’s world of stock charts and market data, the importance of utilising effective technical analysis is vital.
Quite simply, the right chart will paint a clear picture of historical price data, highlighting patterns that will enable you to better predict future price movements.
Your trading platform, be it Metatrader 4 (MT4), or an alternative, should allow you create an array of graphs and charts. All of which, if used correctly, could bolster your trading performance.
One of the best things about day trading with the Nasdaq Index is that in many ways, you can trade it just like you would commodities, forex, the FTSE, or the CAC 40 index. This is because ultimately, you are trading against people, who are predictable.
The biggest hurdle though isn’t getting your head around the Nasdaq 20 and 5635 rules, or 100 heat maps and 5-year graphs. Instead, it’s ascertaining which stocks to trade. Which of the thousands of trading opportunities will provide you with most profit potential?
Do you opt for popular stocks like Facebook or Nike? Alternatively, do you stick to IPOs and hope to profit from the brief hype? Whatever your strategy, finding the best day trading stocks is half the battle. Fortunately, several of the best stock screening techniques have been outlined below.
1. Use Pre-market Movers
Pre-market movement throws many day traders. A stock could be up 5% in the pre-market, only to open up 1% when the opening bell rings. A combination of price shifts and minimal volume is often to blame.
So, be at your desk scanning stocks with plenty of time before the trading session begins. Look for the following:
- Stocks with a value greater than $5. Despite the criticism of those trading penny stocks, $1 stocks simply do not leave much room.
- Look for substantial volume. This will validate a move. A stock that is up 25% on 250 shares could well be worth giving a miss.
- Check for volume average over the last thirty days. This will sifter all the stocks that normally trade with thin volume, that aren’t appropriate for the day trade.
- Check the broader value of the futures markets. It’s best to trade in the direction of the market in general, despite the occasional breakout moving against the market.
Your online trading platform should offer you a selection of pre-market movers. However, if they do not, or you want to try another resource, below are some popular alternatives:
- Nasdaq pre-market values – Lists and ranks the biggest pre-market movers.
- Stock market Watch – Shows both top gainers and losers. It also offers pre-market values of the top indices.
- Stock Market Analysis – Provides you with a list of the pre-market movers every trading morning.
2. Utilise Volume
If you have plenty of funds in your account, you want to be looking for stocks that enable you to enter and exit positions with ease. Some people like to use 35,000 shares per 5-minute bar as a minimum.
Your broker will normally provide you with a volume chart, showing history, leaders, and highlighting any unusual volume patterns. However, you may find the list contains just the top twenty or so stocks. This is where an abundance of day traders will be.
The solution – broadening your search to investigate opportunities that aren’t on the radar of every other day trader.
It’s also worth pointing out that you want stocks that are increasing in volume compared to themselves. A stock that normally trades at 1.5 million shares a day, but has 4 million shares traded before 10:00 is something to take note of.
If your brokerage fails to provide a thorough screener for high volume stocks, consider the highly regarded alternatives below:
- Bar Chart – This offers a list with over 200 symbols.
- The Street – This collates high volume stocks in an easy-to-digest format.
- Unusual Volume by Yahoo Finance – Straightforward to navigate and an effective tool for screening stocks.
3. Monitor Earnings Calendars
If you’re looking for a volatility trigger, an earnings report is ideal. Whilst you don’t want to enter a position before the earnings announcement, you do want to have an idea of who is likely to move. You can then add these to your watch list. All of the websites below publish earnings calendars:
- Earnings Whisper
- Yahoo Finance
4. Develop a Niche
Technology giants and retailers dominate the Nasdaq weightings. So, focus on an industry and track the movement of top issues. See how a couple of the top stocks trade, follow their movements and you’ll be in a better position to predict price fluctuations in future.
However, it’s worth noting those that are always found at the tops of indices do not necessarily make the best investment decisions. They put you in close competition with thousands of other day traders. Instead, consider opting for companies such as Paypal (PYPL), Tesla (TSLA), or IBM, for example.
Unfortunately, those who opt for the jack of all trades, master of none approach, often find themselves out of pocket.
Nasdaq Day Trading Tips
Rise & Shine
Those high Nasdaq historical returns are harder to come by today. No longer can you get to your desk at 09:15 to start the trading day. The market speed is increasing, with a surge in trading volume from hedge funds.
As a result, premarket hours have become essential. You need to be up and prepping for the trading session ahead at around 08:00. This allows you enough time to conduct your morning research, check yesterday’s performance, configure your monitors, and decide which stocks you will actively track for the day.
In the trading world, it is often the case that the early bird catches the worm.
Every market moves in a different way and is home to its own unique nuances. That’s why switched on day traders will practice with a demo account first. Many brokers now provide this service free of charge. Demo accounts are usually funded with simulated money. This means you don’t have to risk real capital until you feel confident.
A Nasdaq market simulation is the perfect place to craft a strategy and test a trading platform. Then when you’re turning consistent profits by the closing bell each day, you can upgrade to a real-time trading account.
One of the biggest catalysts for price movements in the Nasdaq indices are news announcements. So, staying tuned into the news is essential, as successful day trader David Rogerson has highlighted.
If you can react to the news before most of the market, you have got your edge. Thankfully, there is now a vast array of Nasdaq news sources out there. To name just a few popular websites:
- Yahoo Finance
- Google Finance
News websites can often provide economic calendars too. This allows you to track quarterly earnings, plus yearly charts and returns.
Traders who fail to keep up to date with the news, often find themselves lagging behind on trading days, making costly mistakes and missing opportune moments. You want to be up to date with investor relations, IPO calendars, and other ventures of interest.
Successful trader Paul Tudor Jones correctly asserted, “The secret to being successful from a trading perspective is to have an indefatigable and an undying and unquenchable thirst for information and knowledge.” Markets and instruments evolve and you must adapt alongside them.
In today’s digital world, you have access to a multitude of invaluable resources that can help enhance your trading performance. To name some of the most beneficial resources out there:
- Online courses & video tutorials – Get to grips with Nasdaq private markets and day trading futures, whilst benefiting from guru analysis from experienced and successful traders.
- Books & ebooks – There now exists books on every niche Nasdaq related topic under the sun. So, you can learn everything from market holiday schedules and delisting rules to half day and after-hours trading.
- Forums & chat rooms – These can act as an analytics hub, deciphering live streams and price quotes. Not to mention, chat rooms and forums provide the ideal space to brainstorm strategy and ask questions of experienced traders, such as the best Nasdaq composite ETF to go for in terms of volatility.
- PDFs – They can guide you through reading historical 1-year, 2-year, and 10-year price charts. They can also offer step by step instructions on how to setup your own Nasdaq charts based on current 100 holdings. Not to mention, they can walk you through analysing the emini index today.
- Charts – The backbone of technical analysis. You can look at historical price data for 1 week, 1 month, 3 months, and even 50-year price charts. In addition, charts can also help you read e-mini Nasdaq-100 futures historical data and general index charts.
On top of the above educational resources, there now exists a number of Nasdaq specific websites that offer a whole host of data, information, and explanations. They could help you with:
- Index weightings
- Upcoming splits
- Predicting percentage gainers
- A-Z listings
- Nasdaq market holidays calendar for 2018
- $1 listing requirements
- Reading trends
- Upcoming IPOs
- Closing times
- Aftermarket trading
- Index symbols
One of the top Nasdaq trading tips is to explore automated trading once you have a consistently effective strategy. Once you’ve ironed out any creases, trading algorithms and robots can execute trades on your behalf. They act on the pre-determined criteria, saving you time and potentially increasing your profits. This because an automated system can make far more trades than you ever could manually.
A trading journal is a fantastic way to monitor and improve your trading performance. You can use an Excel spreadsheet as your journal. You simply need to note down the following:
- Entry & exit position
- Purchase & sale date
- Position size
- Reason for making the trade
What’s the meaning of all this? With this data laid out in front of you, it’s far easier to compare this with your earnings calendar to identify where and why you are going wrong. Those without Nasdaq trading diaries can go on trading for many more months, sacrificing substantial profits, before they hone in on the problem.
Despite Blockchain and Bitcoin dominating the news of late, the Nasdaq indices continue to house some of the most powerful and influential companies in the world. Therefore, it is little surprise to learn an increasing number of day traders are flocking to try their hand at the market.
However, to maintain an edge and secure those high returns, you will need to utilise the range of resources available to you. You must also select the right broker for your needs and develop an intelligent and effective strategy.