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January 11, 2023In 1971, Nasdaq transformed the financial markets by introducing the world’s first electronic stock market, effectively eliminating the need for a physical location for people to trade stocks face-to-face. 50 years later, it is the world’s largest digital exchange and the second largest exchange in terms of market capitalization.
In this complete guide on the NASDAQ, I’ll explain what it is and what it means, how it works, what it is made up of, the opening and closing hours of trading, the difference with the Dow Jones, how to be admitted to listing, the necessary requirements and finally what is meant by Nasdaq composite.
Difference with Dow Jones
Dow Jones and NASDAQ look like two similar indices: both trade stocks. In reality, the Dow and the NASDAQ are two different indices: if you have decided to start investing, it is important to know the basics of these indices.
The Dow Jones Industrial Average (DJIA) is a stock market index that tracks the performance of the stocks of 30 high-income, industry-leading companies. The DJIA is maintained by the Wall Street Journal, whose editors choose which companies to include in the index. It is the most quoted stock index, to the point that it often functions as a thermometer for the economy.
The NASDAQ is a stock index that contains 3,100 companies and mainly includes companies that work in the technology arena, including Apple and Google, as well as several growth companies.
What is Nasdaq 100
Nasdaq 100 is the index that includes 100 of the largest non-financial companies listed on the Nasdaq. This basket includes securities relating to US and foreign companies that are not holding companies, finance companies, banks or investment companies; the most represented sectors are technology (hardware and software), telecommunications, biotechnology and both retail and wholesale trade.
The Nasdaq 100, like the Nasdaq Composite, is also an index based on market capitalization, even if a particular algorithm is used in calculating the distribution of weights which takes into account the sector in which the listed companies operate, in order to guarantee a certain diversification that makes it possible to consider all product sectors.
The index was launched on January 31, 1985 with a basis of 250 points; given the growth in its valuation, on 1 January 1994 the value of the basket was divided by two and therefore divided into 125 points.
The Nasdaq 100 undergoes quarterly reviews which may determine the change of the securities on the list or the modification of the relative weightings. The revisions take place in March, June, September and December and become effective with the closing values on the third Friday of the month.
To be included in the Nasdaq 100, stocks must have a daily trading volume of at least 200,000 units. An average total market capitalization of 0.1% or more of the average market capitalization of Nasdaq 100 stocks is also required, and companies must have been listed for at least a couple of years.
The Nasdaq is therefore the index with the largest number of companies present in the United States. Another important numerical value is that of daily trades: these are on average among the largest in the world (second only to those of the NYSE) for a capitalization of around 9.7 trillion dollars.
NASDAQ Trends
The medium-term scenario of the Nasdaq 100 confirms the negative trend of the curve. However, the analysis of the short-term graph shows an easing of the bearish phase preparatory to a rise towards the first resistance area seen at 11,140.1. Support at 10840.9.
