Trade the Nasdaq Online

Trade tech stocks via our Nasdaq-100 CFD

Access live market pricing on the Nasdaq 100 via our USTEC CFD (contract for difference). Accessible from the MT4 platform and tradable around the clock, test your trading skills with our fast execution service and New York based trading servers.

A Primer on the Nasdaq-100

  • Established over 25 years ago
  • Represents the largest non-financial companies
  • Contains domestic and international stocks
  • Capitalisation-weighted
  • Contains 103 companies
  • Outperformed the S&P500 since 2008
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Established in 1985
The Nasdaq-100 was launched on 31st January in 1985, which means it has been traded throughout four recessions in the US.

The Nasdaq-100 Represents the largest non-financial companies
Whilst it is commonly referred to as a technology index, the Nasdaq-100 actually represents non-financial companies that are listed on the New York Stock exchange. This means the index contains stocks from transportation, retail, industrial, health care, media and services as well as technology and biotechnology sectors.

The Nasdaq-100 contains domestic and international stocks
Foreign (non-US) companies were first introduced to the Nasdaq-100 in 1998, although they originally had a higher threshold they needed to pass before they could be listed. In 2002 the threshold was relaxed which allowed more non-US companies to be listed.

As of 2018 the Nasdaq-100 contained 10 foreign companies.

Capitalisation-weighted
The constituents are all weighed based on their market cap. The higher the market cap, the higher the weighting the stock will have on the index. This means the largest companies make a greater impact on the index performance.

The top-three companies account for over 30% of the index weighting. Apple, Microsoft and Amazon have weightings of 11.9%, 11.6% and 11% respectively, so traders would be prudent to keep an eye on these stocks if they are to trade the Nasdaq-100 index.

Contains 103 companies

 

Outperformed the S&P500 since 2008
Since December 2009 low the Nasdaq-100 has rallied over 850% whilst the S&P500 has risen ‘just’ 329% over the same period. This is in large part due to the fact that the Nasdaq-100 has a higher concentration of healthcare and technology stocks, which underscores how important it can be to know which sectors are outperforming when choosing which indicator to trade on the long side.

How Can You Trade the NASDAQ-100 Index?

FXTRADING.com allow you to effectively trade the Nasdaq-100 via their USTEC CFD. As a CFD is a form of derivative, you neither become the owner of the underlying market or entering a contract to take delivery of anything in the future.

However, you still gain access to live market pricing with the ability to trade both long and short. By entering long (buying a CFD), a trader is making a bet that they expect the CFD to rise. Whereas by entering short (selling a CFD), a trader is betting that the CFD will depreciate in value.

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Long example: NASDAQ-100 CFD (USTEC)
A trader buys 10 contracts of the USTEC CFD at USD 9,730

  • If the price rises to 10,500 the trader could exit for a profit around $7,700
    • (# contracts x contract size) x (exit price – entry)
    • (10 x 1) x (10,500 – 9,730)
  • If prices fall to 9,250 the trader could exit for a loss around -$4,800
    • (# contracts x contract size) x (exit price – entry)
    • (10 x 1) x (10,500 – 9,730)
  • A 1% margin requirement with 100:1 leverage requires $973 of capital
    • (# contracts x contract size x price) / leverage
    • (10 x 1 x 9,730) / 100

 

Short example: NASDAQ-100 CFD (USTEC)
A trader sells 5 contracts of the USTEC CFD at 9,500

  • If the index falls to 9,000 the trader could exit for a profit around $2,500
    • (# contracts x contract size) x (entry – exit price)
    • (10 x 1) x (9,500 – 9,000)
  • If the index rises to 9,750 the trader could exit for a loss of around -$1,250
    • (# contracts x contract size) x (entry – exit price)
    • (10 x 1) x (9,500 – 9,750)
  • A 1% margin requirement with 100:1 leverage requires $475 of capital
    • (# contracts x contract size x price) / leverage
    • (15 x 1 x 2,600) / 100

 

Costs associated With CFDs

Spread:
FXTRADING.com offer some of the tightest spreads in the industry. The spread is a nominal transaction cost which is applied to your floating P&L (profit and loss) as trade entry and is simply the difference (spread) between the bid and ask price.

The spread can be viewed within MT4 via the deal ticket, market watch window.

  • For example, the bid and ask for USTEC reads 10,66(0).50 / 1066(1).50
  • In this case, the spread between the bid and ask I just $1

The spread is variable and driven by the amount of liquidity available. So higher volume sessions such as New York tends to offer tighter spreads, and they can widen up to and around economic news and events.

Swaps:
Swaps can either be a credit or debit to a position which is held overnight. Based on the interbank rate of the Fed, the USTEC CFD will effectively calculate swaps 7-days a week although as markets are closed on the weekend, Friday is a triple swap day.

Like the spread, swaps are also variable and calculated daily. They can be a credit or debit depending on factors such as whether the trader is long or short, and what the underlying interest rate is.

To view swap information, go to the MT4 market watch window, right-click and select “Specification”.

Market Drivers For the NASDAQ-100

  • Liquidity
  • The Federal Reserve
  • Economic data
  • Risk-appetite
  • Company earnings
  • Share buybacks
  • Options expiration
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Liquidity
In simple terms, the more liquidity there is available within the financial markets, the easier it becomes for transactions to take place between investors (buyers and sellers). Therefore, the amount of liquidity in the system can have a direct impact on financial markets such as equity indices.

If there as an abundance of liquidity in the system, it tends to be supportive of the stock market. Recently we saw the Federal Reserve (Fed) supply nearly $6 trillion in liquidity which has been the main fuel for the rally from the March 2020 lows.

However, the opposite is also true. If liquidity is removed from the financial markets it can weigh on asset prices.

The Federal Reserve
The fed aims to control inflation by injecting or withdrawing liquidity into the financial markets. If the fed injects liquidity, it can be bullish for equity markets whereas if liquidity is removed (or dries up like we saw in the credit crunch in 2008) it can prove to be bearish for stocks.

Therefore, traders closely monitor FOMC meetings and comments from Federal Reserve members, as they have the power to make or break trends.

In terms of measuring liquidity, traders assess the Fed’s balance sheet and the money supply such as M2 (among others). If we see M2 and or the balance sheet rising, it means there is more liquidity in the system and it can be supportive of equity markets.

Economic data
Equity markets revolve around growth, and growth potential. The main measurement of growth is GDP (gross domestic product), although it is a lagging indicator which is only released every three months. Therefor investors try to predict GDP by following economic data such as surveys, employment and production. If data remains strong, GDP is expected to be higher and this can help support equities. Conversely, if economic data is weak then GDP is expected to fall which can be bearish for equity markets.

This means economic data can be used by both day traders and longer-term investors.

Risk-appetite
There are two main states that sentiment can fluctuate between and have an impact on market pricing. “Risk-on” is when investors are feeling positive about the future and want to take on higher risk, which can be supportive of equity markets. Whereas “risk-off” is when investors do not want to take on risk which can be negative for share prices.

Typically, we would expect to see equity prices, commodities, bond yields and high-beta currencies rise during bouts of risk-on and fall during risk-off.

Earnings Season
US companies release company earnings each quarter. Stock analysts release estimates which cover a huge range of metrics including a company’s revenue, price targets and EPS (earnings per share). The shares will then react depending on how well their reports are relative to the analyst estimates. If the earnings report beats expectations, the stock would be expected to rise and if it falls below expectations it would be expected to fall in value.

Whilst this is relevant for stock traders, earnings season is still relevant to index traders. Earnings season is a period of days or weeks each quarter when many companies release reports around the same time. If more companies beat estimates it can be supportive of the index, whereas if more companies miss their estimates it can weigh on the index.

Share buybacks
This is the practice of a company purchasing their own shares with available cash, and effectively reinvesting in themselves. However as this lowers the amount of outstanding shares it also boosts relative ownership of investors. Share buybacks have been around decades, but it has continued to make headlines these past few years with so many companies actively buying back their own shares.

In turn this has added a pillar of support for equity markets, along with a lot of scrutiny along the way.

Options expiration
Whilst options trading it outside the scope of this section, prudent index traders keep an eye on options expiration dates as they can instil volatility around key levels in the hours leading up to them. It is not likely to be an issue to traders on higher timeframes, but intraday traders and of course scalpers should at least be aware of it and choose whether they want to trade the index or step aside until after options expire.

The reason they can instil volatility is because large players will try to defend levels and help their large option bets, moving prices of the index in the process (and not always in a predictable fashion).

It is also wise to keep an eye on ‘triple witching day’, where three types of options expire on the same day and are therefore typically more volatile.

Seasonality and the Nasdaq-100

Some markets such as commodities have seasonal tendencies, whereby they can outperform or underperform throughout some parts of the year. Equities and indices are another market which display seasonality patterns.

However, they need to be treated with caution and are not simply a predictive roadmap, as they are essentially an average of past performance. But if a seasonal pattern is identified and current market conditions allow, seasonal patterns can be a ‘nice to know’ fact going into a month to see if it continues to follow its pattern.

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Santa’s Rally:
This refers to the tendency for equity markets to rally into the Christmas break. Traders are squaring up their positions for the year, fund managers have to hit their quotas and some are likely reinvesting bonuses into the market for tax incentives. Therefore, we’d typically expect December to perform well.

However, it doesn’t always play out that way. December 2019 was a bearish and volatile month for global equity markets.

Sell in May and Go Away:
You’ll typically hear this term thrown around each April and May, where the old Wall Street saying suggests to get out of the markets (or short it) in May and go on holiday. There have been many studies on this and few conclude it to be a good strategy. However, what it does at least do is urge caution to not be too bullish over the summer months which tend to be the least volatile of the year.

Monthly close statistics for Nasdaq-100:

Between January 1990 and December 2019 (30 years)

  • October and November have posted the highest average returns over the past 30 years. They also had the highest ‘win rate’, with a bullish monthly close 70% and 66.7% of the time.
  • June has the lowest win rate of just 46.7%, meaning it has closed lower in June 53.3% of the time.
  • October has produced the highest average high-low range. But is also has the highest ‘variance’, meaning the results have a higher dispersion.

Why Trade the NASDAQ-100?

  • Trade long and short
  • Appeals to traders across multiple timeframes
  • Take a refined view of the US economy
  • Hedge an ETF or a portfolio of equities
  • Can be used as a proxy for risk
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Trade long and short
Regardless of whether the market is bullish or bearish you have complete freedom to entry long or short bets. This is a luxury not always present in the underlying futures markets if it enter ‘limit up’ or limit down’, which prevents traders from entering a new positions or exiting a current one.

Appeals to traders across multiple timeframes
Regardless of your preferred timeframes, the Nasdaq offers opportunities to appeal to many trading styles. Due to the stock markets long-term bullish bias it appeals to investors who like to trade weeks or even months at a time. And due to the constant flow of economic data, it also appeals to intraday traders and swing traders.

Take a refined view of the US economy
Whilst the S&P500 provides a broader view and includes financial stocks, the Nasdaq allows traders to focus on the US economy without the financial sector being involved.

The NASDAQ-100 Can Be Used as a Proxy for Risk
Like global indices in general, the Nasdaq can be used to trade risk appetite. In recent times of turmoil it has remained relatively strong and produced smaller drawdowns, so has been an index of choice during bouts of ‘risk-on’ as it is expected to outperform other indices.

Why Trade the Nasdaq-100 with FXTRADING.com?

  • Trade after market close
  • Lightning quick trade execution
  • All EA’s, automated strategies and scalpers welcome
  • No re-quotes or dealing desk intervention
  • Multiple deposit options
  • Low margin requirements
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Trade after market close
Our index CFDs trade after the official exchanges close, meaning you have around the clock access to trade the Nasdaq from global news.

Lightning quick trade execution
Our access to top-tier liquidity providers allows us to offer some of the tightest spreads in the industry, and at lightning quick speed.

All EA’s, automated strategies and scalpers welcome
Our trading infrastructure is the ideal environment for automated traders and scalpers.

No re-quotes or dealing desk intervention
FXTRADING.com have no dealing desk to interfere with your quoters or trades, making it an ideal platform to trade automated strategies for HFT’s (high frequency traders).

Multiple deposit options
With our global reach we allow clients to fund their account with AUD, GBP, EUR or USD via Skrill, Neteller, Poli and bank transfer.

Low margin requirements
With leverage available for stock index CFDs of 100:1, margin requirements remain very low and therefor appealing to traders across the globe who have had their margin requirements made effectively higher through lower leverage.

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