The Nasdaq is commonly misunderstood as a tech-heavy sort of index. However, it still holds the position of the world’s second-largest index, with more than 3700 public companies listed on its index. All trades are carried out electronically through dealers rather than in a physical location directly between traders. Nasdaq is the first all-electronic exchange, and it remains the first choice for many leading tech companies.
How Does the Nasdaq Work?
Nasdaq attracts some of the largest blue-chip companies globally; the exchange attracts high growth-oriented companies, and the stocks on Nasdaq tend to be more volatile than those on other exchanges. While trading on the Nasdaq, you can participate in listed stocks as well as over-the-counter OTC stocks.
In fact, it’s one of the most widely followed stock indexes in the US, the Dow Jones Industrial Average, and the S&P 500.
The financial and liquidity requirements are the strictest for the Nasdaq Global Select Market. To be listed in the Global select market, companies must meet criteria for earnings, capitalization of assets, and have at least 1,250,000 publicly traded shares.
To be listed on the Nasdaq global market, companies need to meet specific equity and revenue criteria and have at least 1100,000 publicly traded shares and trade at $4. In addition, companies on the Nasdaq capital market are younger than most other companies and have lesser liquidity and revenue. As a result, these companies are more focused on ways through which they can raise capital.
The Nasdaq is open for trading between 9:30 am and 4 pm ET. However, Nasdaq also has pre-market and post-market trading hours. Pre-market hours are from 4 am to 9:30 am, and post-market hours are from 4 pm to 8 pm ET.
Why Invest In Nasdaq?
It’s primarily made up of tech stocks, and its overall performance has been solid in the last quarter-century. For example, the Nasdaq 100 index reported a five-year return of 118% in July 2020 amidst the COVID-19 pandemic.
Nasdaq has still been boasting a solid performance despite the global conditions; this can be illustrated by their chart below.
Nasdaq has been the first to feature electronic trading. It has also been the first exchange to offer a website, the first to keep records in the cloud, and it has pioneered most of the innovations in the stock exchange markets we see today. Nasdaq is still going pretty strong despite the covid 19 pandemics where its composites have risen by 43.6%.
The index is considered a good measure of how well the tech stock market performs and is home to fast growth stocks. For investors that are looking for reliable indexes, Nasdaq is ideal.
The Bottom Line
This is a popular stock index that people love to trade as well as look at. Everyone should always look at things like the greed and fear index as well as futures when trading. As a result, you can start to predict what a stock’s going to do. The more you know, the better off you are when it comes to trading. You can’t predict the future. But watching indexes sure helps with directional plays.