5 Reasons to Trade Nasdaq Futures

E-mini Nasdaq (NQ) and Micro E-mini Nasdaq (MNQ) futures from the CME Group provide 2 of the most efficient and cost-effective ways to speculate the Nasdaq-100 index. Both contracts offer traders exposure to the top 100 American technology companies traded on the exchange.

The Nasdaq-100 Index

The Nasdaq-100 is comprised of the leading 100 companies within the Nasdaq Composite Index, which includes nearly all stocks listed on the Nasdaq stock market. It is commonly referred to as a “tech-heavy index” since more than half of the companies on it are technology stocks.

Nasdaq-100 stocks include Alphabet (Google), Amazon, Facebook, Apple and Microsoft.

Why are tech traders choosing Nasdaq futures as an alternative to buying individual Nasdaq stocks?

1. Day Trade the Tech Sector with Less Capital

With a significantly lower financial commitment required, Nasdaq futures offer a unique opportunity for technology speculators.

As required by the Pattern Day Trader (PDT) rule, a margin stock trading account needs at least a $25,000 balance to actively day trade. On the other hand, you can open a futures account for significantly less through NinjaTrader Brokerage.

2. Trade an Entire Sector with One Instrument

Instead of picking individual stocks, Nasdaq futures traders speculate a cross-section of the tech sector providing targeted diversification within a single asset class. In other words, why pick and choose between thousands of tech stocks when you can trade a cross-section of the entire sector through futures?

Nasdaq futures traders find it much easier to track and trade one futures contract vs multiple different stocks at once.

3. Trade with Leverage & Liquidity

E-mini Nasdaq futures provide significantly more buying power than stocks enabling you to control a large contract value with a small amount of capital. Nasdaq E-mini & Micro E-mini futures offer tremendous leverage, much better than even the most aggressive leveraged Nasdaq-derived ETFs. Please note: Increased leverage comes with increased risk.

Additionally, high liquidity is the norm in Nasdaq futures markets making it easier for traders to execute a trade quickly. This allows futures traders to focus on timing their entries & exits rather than wondering if there will be sufficient volume to trade.

4. Trade Both Sides of the Market with Ease

Futures traders can speculate the Nasdaq both on the long and short side with no uptick rule or short-selling restrictions in place as there are for stock traders. If futures traders anticipate the value of the Nasdaq to increase, they can “go long.” On the other hand, futures traders who expect the Nasdaq to fall can sell a position and “go short.” The flexibility of trading the market in both directions is a noteworthy benefit of all futures trading.

And since Micro E-mini Nasdaq futures are fully fungible with their E-mini counterparts at a 10:1 ratio, they present additional flexibility in position management. Fine-tune a position as market conditions change or offset a position to reduce risk using both NQ and MNQ futures.

5. Trade Around the Clock

Nasdaq futures traders can participate in the market nearly 24 hours a day, 6 days a week for more opportunity. This also provides traders the ability to manage positions any time of day including pre & post-session events such as earnings releases and economic announcements.

The ability to trade around the clock, as well as letting positions work outside of normal stock market hours, provides significant convenience for Nasdaq futures traders.

The chart above, created 100% FREE using the NinjaTrader platform, displays the past 3 months of price action in Micro E-mini Nasdaq futures on a daily timeframe. A 50-day simple moving average has been added for additional analysis.

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By Jonathan Prop

Jonathan Prop is an independent financial advisor. He has been working in finance for the last 20 years. After retiring early in his 40s, Jonathan decided to help others get to grip with financial markets, particularly his area of expertise - forex!

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