How to Trade the Nikkei 225 Index [Tokyo Stock Exchange]

February 24, 2021 21:30 UTC
Reading time: 23 minutes

What is the Nikkei 225 Index? It doesn't get much publicity, yet it's a major stock index. This is the Nikkei 225 (sometimes referred to as the Nikkei stock market, the Japan Index or the Japan 225). Due to the focus being on North American and European indices, market players forget that the Tokyo Stock Exchange is the second-largest financial centre in the world, in terms of market capitalization, behind Wall Street.

Due to its proximity to China, its advanced technological positioning, and its traditional connection with the United States, this Japanese financial index remains an important indicator of the Japanese and world economy.

If you’re looking for new investment opportunities in the stock market, why not trade the Nikkei 225?

 

What is the Nikkei 225?

The Nikkei is the main stock index for the Tokyo Stock Exchange, Japan, comprising the 225 largest Japanese companies. What does Nikkei stand for? The word 'Nikkei', alone, means a Japanese emigrant or descendant of a Japanese national who isn't a citizen of Japan. In Japan, the word is commonly used in reference to people of Japanese ancestry who live abroad as citizens of another country.

Listing of the Nikkei started on September 7, 1950. The Japanese stock market index is made up of 225 stocks spread over 35 industries. Technology represents the largest sector weighting. There are names well known to the general public like Toyota, Honda, Nissan, Mitsubishi, Sony, Nintendo, Nikon, Softbank, etc. Like the Dow Jones Industrial US, the Nikkei is calculated on the unweighted average price of 225 stocks.

The Nikkei 225 index today, therefore, represents the Japanese economy, just like the CAC 40 in France, the DAX 30 in Germany, or the S&P500 in the United States.

How to Buy the Nikkei 225 Index?

To buy the Nikkei 225 stock exchange with Admiral Markets UK Ltd, just follow these few simple steps once you have opened a trading account and accessed your trading platform:

  1. Log into your Admiral Markets account (WebTrader/MT4/MT5, Mobile Application ...)
  2. Go to the "Price window" or "Market observation"
  3. Look for the instrument [JP225]
  4. Right-click on it, then choose "Graph Window"
  5. Once the Nikkei chart has appeared, choose the buy volume on the "One-Click Trading" shortcut
  6. Finally, click on "BUY"

How to sell the Nikkei225 on the stock market?

With CFDs (Contracts for Difference) from Admiral Markets, you can short sell stocks and stock market indices without restrictions. Which isn’t possible on a classic investment account.

To sell the Nikkei225 just follow these same steps:

  1. Log into your Admiral Markets account (WebTrader/MT4/MT5, Mobile Application ...)
  2. Go to the "Price window" or "Market observation"
  3. Look for the instrument [JP225]
  4. Right-click on it, then choose "Graph Window"
  5. Once the Nikkei 225 price has appeared, choose the sell volume on the "One-Click Trading" shortcut
  6. Finally, click on "SELL"

Nikkei Trading Example

Here is an example of trading on the Nikkei index to invest on the Tokyo Stock Exchange.

  • Buy 10 lots in a Nikkei CFD at 21,800 with a close at 22,000, registering a gain of 200 points. Knowing that with 10 lots, the value of a point on the JP225 is equal to 0.85 €, this Nikkei purchase generates a gain of 200 x 0.85 € = 170 €.
  • Sell ​​10 lots on the Nikkei CFD at 21800 with a close at 21600, registering a gain of 200 points. Knowing that with 10 lots, the value of a point on the JP225 is equal to 0.85 €, this Nikkei 225 sale generates a gain of 200 x 0.85 € = 170 €.

The calculation is the same for losing positions. Let's see the example of a Nikkei 225 trade with a losing sale:

  • Nikkei sale of 10 lots priced at 21,800 with closing at 22,000, registering a loss of 200 points. This JP225 sale results in a loss of 200 x 0.85 € = -170 €.

Past performance is not a reliable indicator of future results, nor future performance.

To calculate the margin or capital required to invest in the Japan Nikkei 225, as well as the potential gains/losses, you have at your disposal an Admiral Markets Trading Calculator tool. This is more convenient and quicker than finding the Google Finance Nikkei 225 Index price or the Nikkei 225 Index Yahoo Finance price and calculating it on your own.

Source: www.admiralmarkets.com, Trading and Margin Calculator, carried out on February 16, 2021.

Why Trade the Nikkei 225?

Buying a stock market index constitutes diversification in an investment portfolio. Indeed, the Asian stock market, in this case Japanese, offers a good diversification option for a European trader.

The Nikkei allows any investor or trader to gain exposure to the Japanese economy, which offers a clear reading thanks to the availability of numerous economic statistics, and a central bank, the BoJ, which ensures good communication.

As the Japan Stock Exchange Index is a flagship stock index in international financial markets, its movement follows trends in global stock markets, making it easier to forecast the Nikkei.

Additionally, the Tokyo Stock Exchange being rich in seasoned traders, as in New York or London, technical analysis works particularly well on this stock index. The Ichimoku Kinko Hyo technical indicator, very popular in Japan, is particularly good for trading the Nikkei, and the JPY (Japanese Yen) if you also like to trade Forex.

Another reason to trade the Nikkei is its strong inverse correlation with the Yen. Indeed, the companies making up the Tokyo index are strongly oriented towards exports, so that any increase in the value of the Yen weighs on their income and, therefore, on the Nikkei. Conversely, a fall in the JPY will support the Nikkei 225 stock price.

Knowing that the JPY is a safe haven asset that rises during times of stock market panic, the Nikkei is an ideal instrument to sell when global stock indices are trending down. Indeed, it is under double downward pressure, with sales of global equities and sales of Japanese equities due to the rise of the Yen.

Finally, for those who wish to trade overnight with Asian markets, this is the ideal instrument for that.

Invest in the Nikkei 225 with Admiral Markets

Admiral Markets online broker allows you to follow the price of the Nikkei in real-time, providing a trading platform with a live Nikkei chart. Here are some of the benefits of investing online and trading JP225 with Admiral Markets.

  • Admiral Markets gives you access to the Nikkei-225 Index using CFDs, allowing you to trade on margin with leverage.
  • By trading CFDs on the Nikkei Stock Index, you are speculating on the upward or downward movement of its stock price.
  • The MetaTrader trading platform allows the trader to shape their own Nikkei analysis and forecast using charts and technical indicators.
  • Admiral Markets places particular emphasis on security. Authorized by the FCA (Financial Conduct Authority) in the United Kingdom for European clients, the broker keeps traders' funds in separate bank accounts at Barclays bank.
  • Unlimited volatility and negative balance protection for the special status client.
  • Free deposits and withdrawals, bank transfer not to mention Skrill & Instant Transfer (find out more in the Deposits & Withdrawals section).

Test out trading the Nikkei and many other financial instruments by opening a demo trading account, allowing you to trade risk-free with virtual money. Click on the banner below.

Opening hours of the Nikkei Index

When does the Nikkei 225 open? What time does the Nikkei 225 open and close?

Unlike North American or European indexes, the Nikkei has two live listing times: 9 am-11am and 1pm-3pm, Tokyo time.

The opening of the Nikkei in UK or US time is in the middle of the night. If you live in Britain or the US, you'll need to stay awake most of the night, many hours behind Tokyo, if you want to trade during the Nikkei and Tokyo Stock Exchange opening hours.

Fortunately, you don't have to do this with the Nikkei 225 CFD, the JP225 with Admiral Markets. Indeed, the contract is negotiable from 2:30 a.m. to 9:25 a.m. and 9:55 a.m. to 11:15 p.m. from Monday to Friday.

Find here all the Nikkei CFD trading conditions with Admiral Markets.

Stock Market Tips for Investing in the JP225 Nikkei

Stock market advice and trading tips to invest successfully online on the Japanese stock index:

  • Take the time to learn the stock market and trading before you start.
  • Set up a detailed trading plan for when and how to trade the Nikkei 225.
  • Analyze other major stock indices such as the German DAX and the US Dow Jones.
  • Test your trading strategy on a demo account.
  • Adopt rigorous risk management and money management, without using too much leverage to preserve your capital.
  • Know how to stay disciplined, despite any periods of loss.

All these stock market tips will be very useful to you daily, but only regular practice on your trading account will allow you to gain experience!

How to Analyze the Nikkei225 Live?

To trade or invest in the Nikkei, it’s necessary to do a market analysis before carrying out a transaction.

  • Log into your Admiral Markets trading platform.
  • Open the chart of the S&P500 index to see the evolution of the benchmark and world leader, which closes just before the opening of the Tokyo Stock Exchange.
  • Then go to the Nikkei daily chart D1 to identify the underlying trend.
  • Change the time unit to go to the H1 hourly chart to do your Nikkei intraday analysis.
  • Lastly, switch to the 15 minute M15 chart to identify Nikkei trading opportunities.

Invest in the Japanese index and other markets while always respecting your trading plan and sound risk management.

How to Trade the Nikkei 225? - The Nikkei Trading

It’s time to give some tips on how to trade the Nikkei 225 index. The potential methods of trading the price of the Nikkei 225 index on the stock market are diverse.

The fastest, easiest, most economical way is via CFDs (Contracts for Difference) with an online broker. If you want to invest with a small amount of capital, you might be interested in CFDs.

Their main asset is their flexibility. They allow you to invest and trade during extended hours, not just the opening hours of the stock exchanges. Also, they allow you to trade freely without restrictions on both buying and selling.

By opening a trading account to trade Nikkei and other stock market instruments, you will have at your disposal a trading platform, on which you can analyze charts and trade.

By opting for the Nikkei 225 on a CFD, you’ll have access to leverage, which will allow you to invest more money in the stock market than you have. CFDs make the stock market more accessible to small capital.

A word of caution is in order about leverage. It can double the outcomes for the Nikkei trader. It amplifies the gains, but also the losses. So remember to learn to trade before you start.

For example, you can follow the trading training offered by Admiral Markets for free by clicking on the banner below.

Nikkei Trading Strategies

Depending on your level of risk appetite and your willingness to trade, one of the following three Nikkei trading techniques should be selected:

  • Scalping Nikkei 225: Scalping the Nikkei with multiple positions per day (highest risk).
  • Trade the Japanese stock market index in Day Trading with a few positions per stock market session (moderate risk).
  • Invest online on the Tokyo index with a few positions per week with Swing Trading (lowest risk).

Scalping and Day Trading Nikkei

If you have a part-time job or if you are just available throughout the day, then day trading and scalping may be different choices. Here, it’s a question of trading the JP225 index during the session.

The time units involved will typically be less than the one hour chart in day trading and less than 15 minutes in scalping.

These approaches obviously require taking into account the daily economic calendar, but the importance of fundamental analysis will be less important than in swing trading, since the position will be closed quickly, especially in the case of scalping.

Swing Trading Nikkei225

If you have a full-time job, swing trading is the best alternative. You’ll only need to analyze the charts for a few minutes a week.

To trade in swing trading, the trader focuses on the daily charts and H4, or even H1, to refine the position. In this approach, current events will play an important role since the position will remain open for a long time and will be subject to the influence of various factors.

Nikkei Chart - Live Nikkei Price

Find the Nikkei 225 chart live on the instrument's description page, or the Webtrader trading platform. You can download the free Metatrader trading platform to view, analyze and even trade the Nikkei index live. Click the below banner to download it:

The Nikkei 225 had its best hours in the 1980s thanks to an economic revival in Japan. Technological innovation and soaring real estate prices have largely contributed to this.

In December 1989, it reached an all-time high of 38,957 points, a level that has not been reviewed to this day.

Source: Monaneko - http://www.stat.go.jp/data/getujidb/zuhyou/d09.xlshttp://indexes.nikkei.co.jp/nkave/archives/data, GFDL, https://commons.wikimedia.org/w/index.php?curid=2412825 - Evolution of the Nikkei 225 index from 1970 to the present day, carried out on February 16, 2021. Please note: Past performance is not a reliable indicator of future results, nor of future performance.

The Nikkei price in more recent history recorded a low point in October 2008 at around 6,820, and continued on an uptrend until October 2018, when it peaked at 24,476. But, since then, the Nikkei 225 price has struggled to progress because of the trade war between China and the United States.

The appreciation of the Yen doesn’t help the Nikkei's business, because the economy of Japan, and the companies that make up the Nikkei, are heavily based on exports.

Source: Admiral Markets MetaTrader 5 Supreme Edition, CFD JP225, monthly chart (between May 2005, and September 2019), taken September 20, 2019. Please note: Past performance is not a reliable indicator of future results, nor of future performance.

Nikkei Live Technical Analysis

The following is a technical analysis of the Nikkei 225 medium/long term, performed on September 20, 2019, after the weekly close. It is based on the Ichimoku indicator widely used in Tokyo trading rooms.

Source: Admiral Markets MetaTrader 5 Supreme Edition, CFD JP225, monthly chart (between May 2005, and September 2019), taken September 20, 2019. Please note: Past performance is not a reliable indicator of future results, nor of future performance.

The Nikkei 225 monthly chart shows that the index price was moving on an uptrend, with prices moving well above a bullish cloud.

The 50-period simple moving average in red, slowed its bullish slope, but offered strong support for the Nikkei towards 20,000, and continued to support prices, as it had done twice in the past.

In addition, Nikkei 225 prices bounced off the Fibonacci level 23.6% retracement of the bullish rally between October 2008 and October 2018, which stood around 20300.

As long as this support area holds, the Nikkei 225 may continue to rebound to return to recent highs around 24,476.

A break below would bring the Ichimoku cloud into view.

The monthly RSI (Relative Strength Index) notes a neutral bias, moving around the 50 level.

Source: Admiral Markets MetaTrader 5 Supreme Edition, CFD JP225, weekly chart (between May 2005, and September 2019), taken September 20, 2019. Please note: Past performance is not a reliable indicator of future results, nor of future performance.

The Nikkei 225 weekly chart highlights a bullish breakout of the cloud after several attempts, noting a bullish reversal after a rebound from the mentioned Fibonacci threshold.

The pullback shows the cloud top turned to strong support towards 21,850. Additionally, the Weekly RSI broke above 50, reinforcing the bullish bias for a possible return to highs.

Graphical analysis suggested a bullish Nikkei 225 forecast in the medium/long term.

For daily analysis on stock indices, currencies and commodities, follow the Admiral Markets Youtube channel.

Composition of the Nikkei Index

The Nikkei stock index consists of 225 companies, the list of which is revised annually, usually in September. As mentioned, almost 50% of the companies that make up the Nikkei are tech stocks.

There are automotive champions like Toyota, Nissan, Honda or Mazda; tire companies like Brigestone; images and photography like Nikon, Canon and Olympus; audio with Yamaha (and motorcycles) and Sony and various electronic industries including Fuji, Panasonic, Pioneer, TDK and Toshiba.

This short list shows the global importance of the companies in the composition of the Nikkei, and makes it possible to understand that it is a global index, as important and followed as the European and American indices.

Find the full list of Nikkei companies on the index's official website.

Source: Admiral Markets MetaTrader 5 Supreme Edition, Correlation Matrix, produced October 1, 2019. Past performance is not a reliable indicator of future results, nor future performance.

This correlation matrix shows the historical correlation of JP225 with other instruments over 1,000 sessions.

We observe a strong correlation with other major stock indices, including the DAX at +83, the S&P500 at +88 and the Dow Jones at +90.

The reverse correlation with the Yen is found on EUR/JPY at +62, but less in USD/JPY (+21) and CHFJPY (+22).

Regarding commodities, gold shows only a weak correlation at +17, unlike Brent oil at +85.

Find this correlation matrix and compose one of your own thanks to Admiral Markets MetaTrader 5 Supreme Edition. Download it by clicking on the banner below.

It's time to mention two other interesting indexes, which are a slight variation of the original Nikkei and are interesting to some traders.

The Nikkei Total Return Index

The Nikkei 225 Total Return Index is an interesting index for some traders, as it measures the Nikkei 225 performance, taking into account both price movements and the reinvestment of dividend incomes from stocks at ex-dividend closure dates. Japanese companies commonly fix dividends paying to the shareholders after the ex-date.

The Nikkei Volatility Index

The Nikkei 225 Volatility Index is another separate index that represents the degree of fluctuation expected from the original Nikkei index in the future.

The Tokyo Stock Exchange Economic Calendar

Whatever your trading profile (scalping, day trading, or swing trading), it’s important to follow the economic calendar in addition to technical analysis. Certain economic data may impact the evolution of the Nikkei 225 in the short term.

With Admiral Markets, you have the ability to customize or filter economic calendar data. First of all, you choose the language. Then you set the date range. Finally, you choose the more or less important data which are represented by coloured circles.

You will find economic data regarding the Tokyo Stock Exchange, including:

  • Japan's GDP
  • Industrial production
  • The trade balance
  • Inflation
  • The employment figures
  • The decisions of the BoJ (Bank of Japan) on its monetary policy
  • The Tankan index, equivalent to the US manufacturing ISM

And much more.

On the other hand, the Nikkei 225 tends to react to what is happening on Wall Street, as the world's major stock markets become highly interconnected. Therefore, if you are trading the Nikkei, remember to keep an eye on the US markets.

Why Invest in the Stock Market with Admiral Markets?

Trading the Nikkei and other markets with Admiral Markets offers a variety of unique features and benefits for both short and long term traders.

For example, traders and investors can take advantage of some of the features of a Trade.MT4 account, which offers benefits such as the ability to:

  • Trade equity CFDs, which allows users to trade on margin, meaning you only need a small deposit to control a larger position.
  • Buying and selling stocks short, which means that you could potentially trade the markets up and down.
  • Use the globally recognized MetaTrader 4 and MetaTrader 5 trading platforms with the exclusive Admiral Markets Supreme Edition plugin offering advanced trading orders, a correlation matrix, trader sentiment trading tools and more.

CFD trading is complex and involves risking capital, you should know the risks and be educated in trading before you start. The leverage offered by CFD trading must be controlled to avoid excessive losses.

However, if you are also thinking of taking a long-term view of the stock market and want to invest in public companies around the world, you can consider the Invest.MT5 account where you can enjoy benefits such as:

  • The ability to invest in thousands of stocks and ETFs (exchange-traded funds) from 15 of the world's largest stock exchanges.
  • Open an account with a minimum deposit of €1 and invest from €0.01 per share with a minimum transaction fee of $1 on US stocks.
  • Receive real-time market data free of charge, without delay and at no additional cost.
  • Create a passive income stream by collecting dividend payments.
  • Use the world-famous MetaTrader 5 multi-asset class trading platform.

You can get started right now by clicking the banner below and taking advantage of all the features above and more!

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References

 

INFORMATION ABOUT ANALYTICAL MATERIALS:

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