With over 3,000 companies listed under it, the NASDAQ stock market is the largest in the world. The NASDAQ 100 on the other hand is the more capitalized modified market with a weighted index that is composed of the largest 100 companies in the non-financial sector. Trading under NASDAQ involves the utilization of technical or fundamental trade analysis in order to identify the best price levels to enter a trade. Part of a Nasdaq Trading Strategy is taking bets on which direction the price will go and then implementing stop-loss orders and managing risks by taking profits.
Benefits of Trading in the NASDAQ 100 Index
Countless traders enjoy the diversified exposure that the Nasdaq 100 has to offer. With a large number of non-financial companies on the list, there are many reasons why trading in this sector is ideal. Here are some:
- There is no shortage of both fundamental and technical analysis of this index because it is one of the most popular and widely followed in the world.
- Distinct entry and exit signals are easily seen in the clear technical chart patterns.
- Traders are afforded better liquidity, which then results in tight spreads, further offering entry and exit trades that are inexpensive.
- For 24 hours and 5 days a week, traders can trade the E-mini NASDAQ 100 futures on the Chicago mercantile exchange.
Two Widely Used Nasdaq 100 Trading Strategies
It’s clear that the many benefits of the Nasdaq 100 have made it an ideal choice for many traders. But how does one successfully trade in this sector? From our viewpoint, the successful trading of Nasdaq relies on fairly similar techniques used in trading a variety of financial stocks. It is only common sense for professional traders to rely on strategies that contain core principles and guidelines in order for the trade to be successful. Read on to learn the commonly implemented Nasdaq Trading Strategy based on analysis type.
Trading Nasdaq100 With Technical Analysis
Chart analysis is standard practice amongst traders. Using technical analysis, a trader can determine where the buy or sell signals are. Furthermore, technical analysis can be used as indicators for identifying current market trends, potential retracement patterns, or any shifts in sentiment.
Though there are a myriad of indicators that can be used, any trader must use one they comprehend and are most comfortable with. Proper risk management should go hand in hand with the analysis, along with the use of correct leverage, a risk-reward ratio that is positive, and a 5% total equity (or less) limited exposure to all trades that are open. Aside from these indicators, traders also utilize price patterns when trading in the Nasdaq 100.
Trading Nasdaq 100 With Fundamental Analysis
The price of the index in Nasdaq trading is affected by multiple underlying fundamental variables. It is up to a trader to be aware of these variables and the potential impact they will have on the index. Variables can range from macroeconomic to fundamental compositions. These are what we look out for:
- There are some indices that are weighted differently, and this has the potential of affecting the price. It is vital to know these differences.
- Adverse effects can be seen in changes in the Federal Reserve’s monetary stance.
- Trade wars and currency wars can have a huge impact on large companies in terms of trade barriers and tariffs imposed.
Nasdaq Trading Strategy: Will It Work?
As a trader spends more time learning and honing their skills, it is not unheard of to find more strategies or develop ones that will best fit their trading style. With so many markets to enter, traders must always take the time to analyze and manage their risks to avoid major losses. There is no cut and paste strategy that will universally work. What exists are useful guidelines that a trader can use and tweak. This is what separates a good trader from an amazing one.