The NASDAQ - Things You Should Know

If you're a beginner or are remotely interested in investing, you'll encounter the terms Dow Jones, NYSE or the NASDAQ quite often. One who is seriously interested in the stock market ought to understand these first before going full swing into investing hard-earned money in stocks. This article is going to be a beginner's lesson in understanding the NASDAQ.

Both the NYSE and the NASDAQ are stock exchanges. In its simplest terms, a stock exchange is where people go to if they want to buy and sell shares of stock in a publicly owned company. The stock exchange earns through the fees they charge when they help buyer and seller settle on a price of a particular stock. A company that is publicly traded may only allow its shares to be traded in one stock exchange, in this case, either the NYSE or the NASDAQ. Most technology stocks are traded in the NASDAQ.

The NASDAQ is an American stock exchange headquartered in New York City. It is second only to the New York Stock Exchange in terms of the value of its securities. Originally, the acronym stood for National Association of Securities Dealers Automated Quotations. Now, however, this exchange has gone beyond its "original quote-service roots and has evolved into a major world stock market." The NASDAQ's official stance is "what NASDAQ "stands for" is not nearly as relevant as what The NASDAQ Stock Market has become known for, namely pioneering screen-based technology and an abundance of growth companies." Founded in 1971, NASDAQ now has 3,200 publicly traded companies. Big names as Apple, Amazon, Cisco, Dell Computers, eBay, Google, Intel, Microsoft and Sun are traded in the NASDAQ.

What differentiates the NASDAQ from the NYSE is that its stock trading from its inception has always been done electronically, initially through a computer bulletin board system and telephone. At present, NASDAQ utilizes automated trading systems (trading based on a computer software program) complete with reports on trades and daily trading volumes to facilitate its trading.

The stock market index utilized by the NASDAQ to serve as a benchmark for the whole market is known as the NASDAQ 100 (the NYSE uses the Dow Jones Industrial Average). This index is comprised of 100 of the largest companies in terms of market value that trade on the NASDAQ. Depending on their market value ranking, companies may be added and removed from the NASDAQ 100.

Stocks traded on the NASDAQ typically use four-letter abbreviations apart from a few exceptions. On the NYSE, stocks are abbreviated using three-, two-, or one-letter abbreviation. NASDAQ and NYSE stocks are usually listed side by side on financial channels or the news. The NASDAQ and the NYSE also differ in terms of trading hours. While both stock exchanges have normal trading session that start from 9:30am to 4:00pm on weekdays, the NASDAQ has pre-market and post-market hours that allow trading to take place outside the normal trading sessions. Their pre-market session starts and ends at 7:00am to 9:30am while their post-market sessions occur from 4:00pm to 8:00pm, all in ET.

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