NASDAQ 100 Index: A Guide to Trading the NASDAQ with CFD

One advantage of CFDs is that you can make trades on leverage, which will increase your gains if the trade goes in your favour. However, using leverage will also increase your losses if the trade goes against you. Hence, leverage should be used with caution.

Also, CFDs allow you to take both long and short positions. This means that you don’t have to wait for the index to rise in order to potentially make a profit. You can also take a short position to potentially profit when the index falls.

Lastly, CFDs have a comparatively lower barrier to entry. You can start trading the NASDAQ with lesser capital, compared to buying shares of a NASDAQ index fund.

Key Points

1. The NASDAQ 100 index serves as a key benchmark for the technology sector, comprising the 100 largest non-financial companies from various sectors and is periodically reviewed for balance.
2. Trading the NASDAQ via CFDs allows for speculative opportunities on price movements without owning the underlying assets, offering leverage and the ability to take both long and short positions.
3. Proper risk management, including setting trade sizes, using stop-loss and take-profit points, and cautious leverage use, is crucial for trading the NASDAQ Index effectively.

What is the NASDAQ 100?

The NASDAQ 100 serves as the leading benchmark for the NASDAQ stock exchange in the United States. It tracks the 100 largest non-financial companies listed on the exchange, spanning eight different sectors.

Notably, the NASDAQ 100 excludes financial institutions and banks, aligning with its goal of highlighting the largest and most innovative non-financial companies worldwide.

The index uses a modified market capitalization weighting system, where each company's weight is based on its market cap. This method prevents the largest companies from dominating the index, ensuring a more balanced representation of all constituents.

The NASDAQ 100 is reviewed quarterly, and adjustments are made as needed to maintain its distribution standards. For example, in July 2023, a special rebalancing was conducted when a surge in prices for the largest companies made the index too top-heavy, prompting an adjustment to restore balance.

Why trade the NASDAQ Index?

With leading technology companies comprising over 45% of its constituents, the NASDAQ 100 serves as both an effective barometer and a strong representation of the technology sector.

However, the NASDAQ is not solely focused on tech stocks. The index includes companies that are pioneers in technology and innovation, featuring well-established firms and household names that are at the forefront of technological advancements and innovative practices.

This specialized focus has proven beneficial time and again. In the first three quarters of 2023, the NASDAQ outperformed the S&P 500 by a notable 22.3%, largely due to the rebound of technology and growth-oriented stocks within the index.

Investing in the NASDAQ provides access to the dynamic tech and innovation sector through some of the most successful companies in history. Furthermore, incorporating the NASDAQ into a tech-focused portfolio can help diversify risk and serve as a counterbalance to more speculative investments, such as technology startups.

How to trade the NASDAQ Index with CFD？

Investors looking to capitalise on the volatile price movements of global tech stocks can do so by trading the NASDAQ using Vantage CFDs (Contracts-for-Difference).

CFDs allow speculation of the price movement of the index without direct ownership of fund units or stocks of the companies represented in the NASDAQ. Direct investment in the index is not possible, as it is simply a benchmark tracking a basket of company stocks.

Here’s a simple explanation of how trading the NASDAQ using CFDs works: You open a trade by choosing whether the index will go up or down. If the price goes with your position, you make a profit. If it goes against your position, you will incur a loss.

At the close of the contract, the difference in the price of the index is settled directly in your account.

Try to trade NASDAQ Index CFD with markets.com!

When considering shares, indices, forex (foreign exchange) and commodities for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss.

Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.