For a lot of newcomers, the financial investment arena can often be viewed as daunting. It doesn’t help that there is a sheer number of jargon and abbreviations that go with it. Whether it is NYSE, LSE, or NASDAQ, these exchanges are responsible collectively for trading worth trillions of dollars each and every single day. But what is NASDAQ exactly?
In a nutshell, NASDAQ is a stock exchange that is US-based. This exchange is predominantly about stocks for technology. Apple, IBM, Microsoft, and Facebook are some examples of the hundreds of organizations that belong under the NASDAQ index.
Whenever it comes to analyzing the trade market, it’s a matter of simply monitoring and viewing areas that are repetitive. And this simply boils down to a core belief: as humans, there are certain things, ideas, and aspects that we will believe in no matter what. This is our core belief. Changing these beliefs is possible, but in general, these beliefs already define who we are in the first place. When it comes to trading, the core beliefs are pretty much the same. They define the actions we choose to make and what actions we choose to implement in the marketplace.
For instance, most traders have a core belief that the market traditionally makes a u-turn at the same price point or around it. Thus, one of the first things that would make sense doing is to look for u-turns when we switch on the charts. And one of the things we will immediately notice inside the NASDAQ 100 (in a 1-hour timeframe) is an area where a u-turn occurred.
Generally, this would show an up channel or a trend line angle. One trend line pushes the market up, while the other pushes it down. What these channels show is a pattern—one that repeats itself and can therefore be relied upon. And when we use a pattern of buying low and profiting high as many times as we can, we should have an understanding that there is always the chance of losing on the last trade when the pattern does break.
Imagine driving a car. We know that when the light is red at a stoplight, then we must stop. Yellow is to tell us to slow down, and green is for us to go.
At an intersection with the light on red, our education should tell us that the smart thing to do is wait for it to turn green. When it does turn green, we can safely cross to our destination. However, when we choose to ignore what we know and opt to run a red light, then we also run the risk of getting into an accident or incurring a traffic violation along with its accompanying fees.
It’s a simple analogy that we can relate to trading. We are already aware that when we view the charts and the market dips near the bottom trend lines, the market also tends to go up. This is our red light while the green is our entry. We can wait for that green light and cross as quickly and as safely as possible, or we can opt to run the red. As logic would dictate, the obvious choice is to go for the green light.
The point is to not to avoid risk. Rather, keep in mind that in trading, the success happens over a period of time. Essentially, this means we must accept that for every 10 trades we place, we should already expect that three or four of them will fail. That still gives us a 60% chance of winning. As long as we have proper risk management in place, then we should not be fearful of a NASDAQ trade.