NASDAQ-100
If you’re new to trading, you might not be familiar with the Nasdaq 100. This guide aims to offer insights into the Nasdaq index and how to start trading or investing in it effectively. You’ll find a chart of the Nasdaq 100 index live below, along with information on Nasdaq 100 investing and a smooth trading strategy.
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NASDAQ-100 Index Live
What is the Nasdaq 100 index?
The Nasdaq 100 index is a composite stock market index formed via a weighted measurement of the performance of the top 100 small-cap non-financial companies in the United States.
The Nasdaq 100 index is composed of companies listed in the following sectors:
- Technology
- Industrial
- Retail
- Biotechnology
- Telecommunications
- Transportation
- Media
- Healthcare
- Services
The financial companies that fit the above classification are listed in a separate Nasdaq index known as the Nasdaq Financials-100. The Nasdaq-Financial-100 index tracks companies in the following sectors:
- Banking
- Insurance
- Brokerage
- Mortgage
The Nasdaq 100 index was launched in January 1985 by the National Association of Securities Dealers Automated Quotations. The index started as a subsidiary of the National Association of Securities Dealers (NASD), a self-regulating industry organisation that metamorphosed into the Financial Industry Regulatory Authority (FINRA).
The Nasdaq 100 index started with a baseline price of 250. It grew to 800 in December 1993 and had to be reset. Nasdaq 100 options were introduced on the Chicago Board Options Exchange (CBOE) in 1994. By 1998, foreign companies were admitted as American Depository Receipts (ADRs).
The Nasdaq 100 index has grown exponentially in value each year since 1985, except for the dot com bubble of 2000, followed by the 2001 – 2002 fallout from the September 11 terrorist attack, the 2008 global financial crisis, and the 2018 US-China trade war, being the only years in which the index closed lower than the previous year.
NASDAQ 100 Futures
What Are Nasdaq 100 Futures?
The Nasdaq 100 futures are contract-for-difference assets built to track the underlying Nasdaq 100 index price changes continuously. The Nasdaq 100 index futures track pre-market and after-hours trading and offer the investor an opportunity to trade the Nasdaq 100 index during and outside its official trading hours.
The Nasdaq 100 futures is a composite index that features the top 100 small-cap stocks within the technology, biotechnology and other non-financial sectors.
Trading on the Nasdaq 100 futures started on the Chicago Mercantile Exchange (CME) in 1996 at an initial value of 100 times the Nasdaq 100 index. This was followed shortly by the launch of the e-mini Nasdaq 100 futures, priced at 1/20th of the value of the Nasdaq 100 index. This action allowed for greater retail participation since the capital requirements for trading e-mini Nasdaq 100 futures were lower.
The contract size is $20 per contract and comes with a tick value of 0.25 points for every $5 move. The trading hours for this contract are 1700 hours to 1600 hours the next day.
Micro e-mini contracts are now available on some retail platforms.
Nasdaq 100 futures are leveraged contracts, meaning that the trader can hold a larger position with a percentage of the initial capital requirement for setting up the trade.
How to Invest in the Nasdaq 100 Like a Pro - 3 Simple Steps
Here are three simple steps to invest in the Nasdaq 100. These steps cover everything from setting up your trading portfolio to the trading process, after which you can cash out any earnings made.
Investing in the Nasdaq 100 index like a pro requires the following:
1. Selecting a suitable Nasdaq index broker
1.1. To trade the Nasdaq index like a pro, opt for a regulated broker with a reasonable minimum deposit requirement and contract sizes that keep your account within a maximum of 3-5% exposure limits.
ATFX provides a minimum spread of 2.5 points and allows trading from 0.01 lots on the Nasdaq index. The maximum lot size is 30 lots, with a $10 pip value per lot and 1:100 leverage on your positions.
2. Opening and funding a trading account
3. The trading process
3.1. Nasdaq 100 futures trade for 23 hours daily, with peak volatility typically in the hour before and after the market opens, the first hour of trading, and the final two hours before close. Volatility also spikes around major news releases like Fed decisions, FOMC minutes, and jobs or inflation reports.
Socio-political and economic events determine which fundamentals matter for the Nasdaq index. Knowing its peak activity times helps refine trading strategies efficiently, reducing chart analysis time.
Due to its significant price movements, the Nasdaq index is ideal for day traders and scalpers. With contract size at (0.25 points = $5), profits can be lucrative, but on the other hand, losses can be severe. Undercapitalized retail traders shouldn’t attempt long swing or position trades. Market bias shifts swiftly, so match your capital and trading style with realistic goals using the Nasdaq index’s behaviour as a guide.
Cashing out your earnings
Traders should avoid immediately cashing out profits. Instead, consider compounding profits for potentially higher returns. Some traders manage two accounts: one for quick withdrawals and another for compounding gains over time.
If you choose compounding, online calculators can guide you. Some strategies let you adjust figures and withdraw a small percentage of profits, reinvesting the rest with your initial capital.
Is the Nasdaq Index a Good Investment?
Should you invest in the Nasdaq index? The answer is absolutely yes. Thankfully, there are good Nasdaq index brokers, and you will be introduced to one by the end of the article.
Trading the Nasdaq index is wise amid current record-high global inflation. The US Federal Reserve bases its monetary policy on inflation and employment data. As the US labour market improves, evidenced by better Non-Farm Payrolls and declining Initial Jobless Claims, the Fed has begun tapering stimulus measures introduced during the COVID-19 pandemic. This inflation surge, driven by strong demand outstripping supply, has pushed US inflation to a 41-year peak. Consequently, the Fed has responded by raising interest rates, a trend expected to persist.
Given its sensitivity to changes in monetary policy and global risk sentiment, the Federal Reserve’s actions will result in unique trading opportunities on the Nasdaq index.
3 Nasdaq 100 Trading Strategies You Need to Know
There are three Nasdaq 100 trading strategies you need to know.
- Intraday strategies
- News trading strategies
- Swing trade strategies
Many retail traders engage in intraday trading, including day trading the Nasdaq index. Various strategies involve candlesticks, chart patterns, and pivot points to buy at lower prices and sell at higher prices based on predefined parameters.
News trading requires focusing on high-impact economic releases, such as consumer inflation data, Non-Farm Payrolls, Fed official speeches, and interest rate decisions, to trade the Nasdaq index. Traders react by buying or selling Nasdaq index futures based on the news sentiment. Access to an economic calendar and real-time news feed is crucial for timely updates on economic data and news releases.
Swing trades involve holding positions on the Nasdaq index beyond daily market hours, typically for several days. It incurs fewer costs than day trading due to lower portfolio turnover but involves paying rollover/swap fees for overnight holds. However, trades can be more volatile due to market gaps at open, leading to significant slippage. Swing traders must navigate news-driven volatility, which can result in significant profits or losses.
Swing trading on the Nasdaq index demands sufficient capital to manage its daily volatility. It requires expertise due to the index’s complexity. This article later presents a bonus trading strategy focused on highlighting supply and demand zones.
What is the Nasdaq 100 forecast for 2022?
The forecast for the Nasdaq 100 index is an attempt by analysts and traders to predict where the index will end up at the end of the year. It should be noted that while a forecast may point to certain levels, there will be a lot of volatility along the way and several up and down movements in the price action. However, the forecast will indicate the index’s trend and allow traders to take advantage of it.
So, where is the Nasdaq 100 headed in 2022? What is the Nasdaq 100’s long term forecast?
Two factors will determine the Nasdaq 100’s forecast for 2022:
- The US Federal Reserve’s Monetary policy
- Geopolitical factors
As far as monetary policy is concerned, 2022 will be the year of rate hikes. So far, the Fed has raised interest rates by 150 bps. Furthermore, many expected a 75 bps rate hike during the 28 July 2022 meeting, which happened but did not trigger an adverse market reaction.
Looking at the Nasdaq 100 long-term term chart again, you can see the steepest rise in the Nasdaq 100’s history between May 2020 and January 2022. The Fed’s decision to step in with the most extensive stimulus program in US history to prop up the economy in the face of the COVID-19 pandemic. Quantitative easing provided cheap money for investors to buy beaten-down stocks, and the Nasdaq 100 rose to new all-time highs. But having hit these highs, the index became overdue for a correction. The Fed’s decision to raise rates was the fundamental trigger for this correction, which is expected to continue throughout 2022.
The chart above shows the Fibonacci retracements from the April 2020 swing low when the Fed started its stimulus program up to the January 2022 swing highs. The retracement phase of the price action is still ongoing, with the Nasdaq 100 currently testing the support provided by the 50% Fibonacci retracement level. Further rate hikes could send the Nasdaq 100 lower, with the 61.8% and 78.6% Fibonacci targets at 10057 and 8915, respectively, being the potential downside targets. Of course, many up-down swings will occur along the way, so traders should closely watch their trades and react quickly to changes in the underlying index. Traders should also use lower time frame charts to analyse the index.
Regarding geopolitics, the Russia-Ukraine conflict is expected to play a minor role in the Nasdaq 100’s price action. Instead, the effect will be exerted via the global economic outlook and predictions since many of the Nasdaq 100’s companies have a global presence. However, the biggest impact on the Nasdaq 100 will come from the Fed’s monetary policy actions.
The Nasdaq 100 index’s long-term forecast remains bullish. As can be seen from the index’s price action since 1985, the index has continued to rise over the long term despite several pullbacks occasioned by economic recessions.
Nasdaq 100 After hours
Nasdaq 100 historical data
The snapshot above tells the story of how critical socio-political and economic events in the last 22 years have defined the value of the Nasdaq 100 index. Traditionally, any event that triggers falling interest rates is a Nasdaq-positive event. In contrast, conditions that bring about higher interest rates drive investment flows to money-market assets and are considered Nasdaq-negative.
You must understand these Nasdaq 100 market cycles as they are the key to making a ton of money from the index. Currently, we are in the cycle segment where the pandemic stimulus programs that flooded the economy with cheap money for investment and drove the Nasdaq 100 to new highs have ended. The QE programs have now been replaced with tighter monetary policy leading to higher interest rates, making money-market assets such as bonds more attractive to investors and stocks less attractive.
Nasdaq 100: Cycle of Events from 2016 to Date
The chart above is self-explanatory and shows, in a nutshell, the overriding fundamentals that drove the 7-year bull run from 2013 to 2020. It also highlights the COVID-19 pandemic hit of 2020, the 2-year massive bull run driven by cheap stimulus money, and the market’s reaction to monetary policy tightening by the Fed, which is where the market is at as of writing.
Nasdaq 100 Technical Analysis
Many Nasdaq 100 traders are either scalpers or day traders. Either way, the aim is to catch a move with as little drawdown as possible while targeting to make small profits that add up over time. As a result, day trading the Nasdaq 100 requires a spot-on identification of potential support and resistance areas. These are the demand and supply zones from which one can trade.
Here is a commonly used strategy for day trading the Nasdaq 100 index.
- The first step is identifying the demand and supply zones on the Nasdaq 100 chart. The most popular chart used by traders to do this is the 1-hour chart. Remember, this is intraday trading and the long-term charts, such as 4-hour and daily charts, are for swing trading.
- After identifying the demand and supply zones (more like support and resistance zones), you can aim to buy off the demand zone and sell on the supply zone using the 1-minute or 5-minute chart. Again, use filters to get entries that have a greater chance of success. For example, a divergence with the RSI or a candlestick reversal pattern with high probability usually works most times; however, if there is a high-impact news release, trade in the direction of the data.
- Always aim to risk not more than 3% of your account size on a single trade. That way, you will still have capital if your trade ends up a loser.
- Aim for realistic exits. Again, use filters that point to a reversal to exit your trade.
Here is an example of how this strategy could have played out on the Nasdaq.
Nasdaq 100 1-hour Chart Showing Supply and Demand Zones
The 1-hour chart above shows the supply and demand zones for the Nasdaq 100 futures asset.
- The demand zone is where the price candlesticks form lows within a range of prices. This area is where the trader would seek to go long if the price action re-enters this zone in future.
- The supply zone is an area of price where the candles/bars form highs. The trader would seek to sell at this zone. Any other price push towards the same zone should trigger a sell, as highlighted above.
Having delineated the supply and demand zones, the next step is to drop down to the 5-minute chart. The US CPI report blew expectations out of the water on this day. Core CPI came in at 0.7%, up from the previous month’s 0.6% reading and higher than the market expectation of 0.5%. A higher-than-expected core CPI reading reinforced market expectations that the Fed would hike rates at its 28 July 2022 meeting. This is a Nasdaq-negative event, and the trader should be looking to sell.
Nasdaq 100 5-minute Chart Showing Sell Entry Opportunities
Right on cue, the price stepped into the supply zone at 12,000, dropped to 11800 and went back into the supply zone for another selling opportunity. However, this time, the trade went all the way into the demand zone, with this area marking the end of the trade at 11500 for a 500-point move.
What are the criteria for companies to be listed on the Nasdaq 100?
The Nasdaq 100 provides four pathways (or rules) for companies that want to be listed. To qualify for Nasdaq listing, a company must fulfil at least one of the four requirements, in addition to the general listing rules for all companies.
General Listing Rules
- The bid price of the company’s shares must not go below $4. If the closing price is $2 or $3 and the company has at least three market makers for its stock, it could also qualify.
- Companies must have publicly traded outstanding shares of at least 1,250,000 at the time of listing. This does not include the ones held by key players in the company or any other shareholder that owns more than 10% of the company’s shares.
- The company must have at least 2,200 shareholders who own 100 shares or more or 500 shareholders who trade more than 1.1 million shares in annual trading volume.
- Companies must pay an application fee of between $5000 and $25,000, depending on the type of security and company size. In addition, a fee reflecting a percentage of the shares being issued may be charged.
- Companies must pay annual listing fees and other charges for activities such as filing and issuing additional shares.
Specific Listing Rules
Set 1: Earnings
The company must show evidence of pre-tax earnings of at least $11m in the past three years, or $2.2m in the past two years. In addition, it must have had no net loss in the three previous years.
Set 2: Capitalization + Cash Flow
- Aggregate cash flow of at least $27.5m in the past three years.
- No negative cash flow in that period.
- Market cap of $550m in the last year.
- Exemption for companies with an average market cap of $850m in the past year.
- Minimum of $110m in revenues in the past year.
Set 3: Capitalization + Revenue
If the company can prove a market cap of $850m in the past year, or $90m in revenue, it can qualify using this route.
Set 4: Equity + Assets
Total assets of at least $80m and shareholder equity of at least $55m can reduce market cap requirements to $160m for companies wishing to qualify for Nasdaq listing using the Set 4 route.
What is the difference between the Nasdaq 100 and the Nasdaq composite?
There is a difference between the Nasdaq 100 index and the Nasdaq Composite Index.
- Nasdaq 100: large-cap growth index that houses the 100 top domestic and international non-financial companies based on market cap.
- Nasdaq Composite: Comprises ALL of the Nasdaq’s domestic and international companies listed on the Nasdaq exchange, which comprises 3,700 stocks.
What moves the NASDAQ 100 index?
The Nasdaq 100 index is sensitive to global risk sentiment, Federal Reserve monetary policy, high-impact economic releases from China and the US, and geopolitical events. These are the primary drivers of the Nasdaq 100 index. Everything else that moves the index revolves around these primary drivers.
How is the NASDAQ 100 index calculated?
When and Why is the NASDAQ 100 rebalanced?
The Nasdaq 100 index undergoes rebalancing from time to time. This rebalancing process assigns new weighting standards for the index. Rebalancing the Nasdaq 100 index must account for events such as delistings. Furthermore, bankruptcy proceedings (which force regulators to stop all trading activities in the affected company), mergers and acquisitions and any other reasons that could impact the tradability of a listed stock.
Even though rebalancing is an annual event, the latest rebalancing was done on 29 April 2022. As a result, all Nasdaq 100 tracking assets had to cut their Apple holdings from 20% to 12% and raise their Microsoft weighting to 5%. The new weighting became effective on 2 May 2022.
Who should invest in the NASDAQ 100 index fund?
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FAQ
It was created in 1985.
The technology stocks, especially the so-called FAANG stocks (Facebook, Amazon, Apple, Netflix and Google).
The exchange has a board that reviews applications and gives final approval to companies that meet the listing criteria.
The Nasdaq 100 index has 100 companies, while the Nasdaq Composite index has over 3,700 stocks.
The Nasdaq 100 has generated a compound annual growth rate of 14.74% over the past 36 years.
The Nasdaq 100 is managed by a board of directors that oversees its strategic direction, business performance and operations.
The Nasdaq 100 is managed by a board of directors that oversees its strategic direction, business performance and operations.
There is no limit to the index’s growth. Instead, it is a function of the level of demand that investors place on the component stocks over time.
The Nasdaq 100 opening hours are from 9:30 to 16:00 (EST) in New York.
No, the S&P 500 has its unique listing requirements.
Whether an index asset is overvalued or not depends on inherent fundamentals and other factors used to arrive at such determinations.
The value of the index is calculated by taking the closing price of each stock and multiplying it by a weighting factor. This is constantly recalculated to give the index’s value.
ATFX offers the Nasdaq 100 as a tradable asset.
The Nasdaq 100 index is not strictly a tech index since it features stocks from other sectors. However, the index’s weighting leans heavily towards technology stocks, which is why it is colloquially known as the tech index.
The best time to trade is during the market hours of the underlying index, especially in the final hour before the market opens, the first hour of market opening, and the last two hours of the market’s trading session.
It is susceptible to global risk sentiment and US monetary policy, which are the primary drivers of price movement as of writing. However, its volatility and leveraged trading status make it a suitable asset to trade.
The Nasdaq has only ever crashed when extreme market conditions, such as the Dot-com bubble of 2000, the September 11, 2001 attacks, the global financial crisis of September/October 2008 and March 2020 when the COVID-19 pandemic struck.
The Nasdaq 100 index is not a stock. Therefore, it does not pay dividends.
The Nasdaq 100 index is a market-cap weighted index.
