The NASDAQ In Simple Steps...

Created in 1971, the NASDAQ was the world's first electronic stock market and is now the largest U.S. electronic stock exchange. With approximately 3,300 companies, it lists more companies and, on average, trades more shares per day than any other U.S. market.

It is home to companies that are leaders across all areas of business including technology, retail, communications, financial services, transportation, media and biotechnology.

Stocks traded are usually the smaller, more volatile corporations and include many start up companies. Although stocks trading here must meet certain minimum requirements, those requirements for size, profitability etc. and less rigid than the NYSE.

The initials stand for National Association of Security Dealers Automated Quotations. It is a computer operated system owned by the NASD that provides dealers with price quotations for stocks and securities traded through the NASDAQ.

On July 17, 1995 the NASDAQ stock index closed above the 1,000 mark for the first time. The index peaked at 5132.52 on March 10, 2000, which signaled the beginning of the end of the dot-com boom.

Over the years, the index has proved to be volatile. It obviously was a major beneficiary of the tech boom of the late 1990s, but also faired equally poorly when that bubble burst. Having then regained some ground, the financial crisis of 2007/8/9 was very rough on the bourse.

Watch These Free Videos And Learn How To Trade The Stock Market

As noted above, the Composite Index passed 1,000 in July 1995, but in March 2009 it hit an intra-day low of 1,265. This is despite passing 5,000 in the year 2000. This kind of volatility is not for the easily scared or everyday investor and is why much of the 'day trading' in the United States - and around the world - is conducted here.

There can be little doubt that this is the stock exchange that is the spiritual home of day trading. Historically, the abundance of small, high-growth companies with unusual stories and backgrounds has offered opportunity to savvy risk takers in ways that the Dow Jones Industrial Average probably has not. The Dow Jones is generally considered to have much larger, more stable, more traditional companies.

In some ways, this volatility fuels more volatility. Short term traders are drawn in to the market seeking the fast price moves they need, but by definition, that makes prices in the market less stable, which draws in more short term traders.

This is a phenomenon that George Soros calls 'reflexivity' and describes the ability of the bigger players in a market to move the market with their actions. Obviously, this is more likely for the big hedge funds and investment bank 'prop' trading desks (proprietary trading means that they trade on their own account rather than for clients). These are known as the 'hot money'. Beware of being caught on the wrong side of their momentum!

For people that wish to buy stocks to invest on this exchange, be prepared for volatility and some big price changes!

Indices of The NASDAQ Stock Market:

The following common securities are eligible for index inclusions. There is no distinction between either the National Market vs. the SmallCap Market, or domestic US vs. Non-US securities.

Security Class

American Depositary Receipts (ADRs)


Limited Partnership Interests

Ordinary Shares

Real Estate Investment Trusts (REITs)

Shares of Beneficial Interest (SBIs)

Tracking Stocks

The following issue types are not eligible for inclusion in the indices: closed-end funds, convertible debentures, exchange traded funds, preferred stocks, rights, warrants, units and other derivative securities.

If you would like to see the latest news and prices for the Composite index, please follow this link to Yahoo! Finance.

The NASDAQ 100 Future Index

Both the E-Mini NASDAQ 100 and the NASDAQ 100 contracts are based on the same underlying index, the NASDAQ 100 index.

Both of these are cash settled to the same index value on quarterly expirations. They also both settle daily to the same futures settlement price.

The GLOBEX2 ticker symbol is NQ. The ticker symbol for AON trading is NV. AON stands for All-or-None and relates to the number of contracts being traded. The E-Mini NASDAQ 100 is an IOM product.

There are several differences between the E-Mini NASDAQ 100 contracts and the NASDAQ 100 contracts:

The E-Mini contract value is only $20 times the index.

The E-Mini tick size is .50, or $10 per tick. E-Mini futures can trade up until 8:30am (Chicago time), on expiration day.

E-Mini futures have only two quarterly contracts listed for trading.

An E-Mini futures order for 30 contracts or fewer must be traded on GLOBEX®2. During pit trading hours, orders for 31 or more contracts must be traded via open outcry on an AON basis only.

At the time of writing the position limit for NASDAQ 100 futures / options is 5,000 futures equivalents net long or short. This limit encompasses all NASDAQ 100 futures, futures options, and E-Mini NASDAQ 100 futures.

To read more about related topics, please visit:

NASDAQ Information Including The QQQQ Tracker

How Does The NASDAQ Future Index Work?