THE NASDAQ 100
Overview of the NASDAQ 100
The NASDAQ 100 is one of the most popular stock indexes in the world of trading. One of the major reasons for this is that it is tech-heavy and features some of the most recognizable companies in the world, including Amazon, Alphabet (Google), Facebook, Apple, and Tesla.
Another notable feature of the NASDAQ 100 is that while it is famous for grouping together some tech giants, it excludes all financial companies, such as commercial and investment banks.
Not to be confused with the NASDAQ Composite, which features over 3,000 companies that are listed on the NASDAQ exchange. The NASDAQ 100 features only the top 100 companies on the NASDAQ exchange. This smaller number of participants means it can be more volatile than the NASDAQ Composite, something which is often considered a positive in trading, especially for day traders.
What it takes to be included on the NASDAQ 100
As you can imagine from the highlight reel of names that were listed as an example of some of those on the NASDAQ 100, gaining access to this exclusive club is not easy.
While there is no minimum requirement on market capitalization size, the list is composed of the top 100 companies on the NASDAQ all of which are multi-billion-dollar companies.
In more concrete terms, companies listed on the NASDAQ 100 must maintain daily trading volumes of over $200,000, produce quarterly and annual reports, have been publicly traded for at least 90 days, and be free from all and any bankruptcy proceedings.
How is the NASDAQ 100 weighted
All companies on the NASDAQ 100 are some of the biggest in the world. Within the index, some companies are bigger than others. For this reason, it is necessary for the index to follow a modified capitalization methodology. This method means that individual companies are weighted according to their market capitalization and then balanced out against each other. This prevents one company from having an overly big influence on the index as a whole. This weighting is adjusted on a quarterly basis, a level of rigor that also adds to the index’s popularity with traders.
The NASDAQ 100 also undergoes an annual rebalancing. The two major factors which determine whether a company remains on the index or not is its share price on the final trading day of October, and its total number of shares on the last day of trading in November. A company that drops out of the top 100 but still falls within the top 125 companies on the NASDAQ will be allowed to remain in the index if it was inside the top 100 in the previous year.
Trading the NASDAQ 100 on Capitalix
For those traders who would like to enter into what many consider to be the true heart of trading, the NASDAQ 100 (NDX) is a great place to start. The familiarity that most people have with its leading companies make fundamental analysis trading a simpler option than with other indexes. And its high liquidity means that Capitalix is able to offer some of the most competitive spreads on this asset.
As mentioned earlier, the volatility of the NASDAQ 100 makes it an index that is of particular interest to those traders who prefer to follow the day trading strategy. Capitalix offers you a wealth of technical analysis tools within our platform for you to plan when to enter the market and to work out whether today is going to be a buy or a sell.
As with any asset traded on Capitalix, it is recommended that whatever your strategy, your exposure on any trade should never be more than 5% of your total capital.