How to Trade the Nikkei 225 – Trading Tips and Tuturials

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Contents

Nikkei 225 (^N225)

Previous Close 17,818.72
Open 17,951.44
Volume 0
Day’s Range 17,646.50 – 18,059.15
52 Week Range 16,358.19 – 24,115.95
Avg. Volume 97,410

U.S. Stocks Whipsaw After Jobs Data; Oil Rallies: Markets Wrap

(Bloomberg) — U.S. stocks fluctuated and the dollar held gains after a plunge in hiring last month confirmed the pandemic’s devastating toll on the world’s largest economy. Oil rallied on expected output curbs.The S&P 500 was mixed as investors digested the abysmal jobs report that captured data in the period largely before government-mandated shutdowns went into widespread effect. As with record claims for unemployment, the latest numbers bear little information on the current state of the economy, making it difficult for investors to value financial assets.“No one has ever experienced anything like this,” Bruce Bittles, chief investment strategist at Baird, said by phone. “we’re getting the shock numbers out and the markets tend to front-run bad news. In other words, a lot of the bad news is already built into the market.”The S&P 500 is down about 1% in the week, largely holding a rally that propelled it 18% higher in three days last week. That came after the fastest 30% plunge on record as the pandemic forced the economy into a virtual standstill. While volatility has eased somewhat, stocks are still regularly notching daily moves that until recently would have been considered huge.Earlier, futures contracts briefly erased overnight losses and oil surged on reports large producers are ready to cut output. Crude jumped another 7% Friday after a record jump on news the OPEC+ coalition will hold a virtual meeting on Monday and that Russia is ready to cut production.In Europe, data showing an unprecedented slump in the region’s economy last month pushed the Stoxx 600 Index lower, though it also trimmed its retreat. Asian equities saw modest losses in most markets to cap a third weekly decline in four. The yen weakened alongside the euro, pound and Swiss franc. Treasuries drifted.With lockdowns for many economies around the world expected to go on for longer, data are showing the severity of the impact. Nearly 10 million people in the U.S. have lost their jobs in the past two weeks, while the virus continues to pressure corporate balance sheets. American Airlines Group Inc. will slash international flying as far out as the end of August as the pandemic batters travel demand through the normally busy summer season.“We are not going to have the real recovery in the market until what we think is the peak in the amount of infections and deaths,” Stephen Dover, head of equities at Franklin Templeton, said on Bloomberg TV. “We are going to continue to have very wide volatility until we can get over this uncertainty.”These are the main moves in markets:StocksThe S&P 500 Index rose 0.4% as of 9:41 a.m. New York time.The Stoxx Europe 600 Index dipped 0.1%.The MSCI Asia Pacific Index decreased 0.7%.CurrenciesThe Bloomberg Dollar Spot Index advanced 0.6%.The euro dipped 0.6% to $1.079.The British pound fell 0.9% to $1.2282.The Japanese yen decreased 0.6% to 108.54 per dollar.BondsThe yield on 10-year Treasuries fell less than one basis point to 0.59%.Germany’s 10-year yield decreased one basis point to -0.44%.Britain’s 10-year yield dipped one basis point to 0.315%.CommoditiesGold advanced 0.1% to $1,615.99 an ounce.West Texas Intermediate crude climbed 6.4% to $26.94 a barrel.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

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Dow Futures Slide After March Payroll Report Shows 700,000 Job Losses; Oil Extends Rally As Trump Pushes for OPEC Production Cuts

With coronavirus infections topping 1 million, and nearing the 250,000 mark in the United States, investors are counting the economic cost of the global pandemic heading into the Friday trading session.

Global stocks fall as business signals hit from pandemic, oil grinds higher

Global stock markets sank on Friday, as more companies flagged a hit to business from the coronavirus pandemic while oil prices extended their previous day’s gains on hopes of a cut to global supply. With virus-fighting lockdowns raising the risk of a prolonged global downturn, investors continued to seek the safety of the U.S. dollar and government bonds, pushing U.S. Treasury yields near their lowest in three weeks. With over a million people infected worldwide, there were more signs the pandemic would take a massive toll on economic growth.

Stocks fall as business signals hit from pandemic, oil grinds higher

Global stock markets sank on Friday, as more companies flagged a hit to business from the coronavirus pandemic while oil prices extended their previous day’s gains on hopes of a cut to global supply. With virus-fighting lockdowns raising the risk of a prolonged global downturn, investors continued to seek the safety of the U.S. dollar and government bonds, pushing U.S. Treasury yields near their lowest in three weeks. With over a million people infected worldwide, there were more signs the pandemic would take a massive toll on economic growth.

Asian markets dip as oil prices retreat

Asian stocks fell Friday after Wall Street gained for the first time in three days on stronger oil prices despite enduring uncertainty about how long the global economic decline due to the coronavirus pandemic will last.

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Asian markets look to follow Wall Street rally as oil surges

Asian markets on Friday looked to latch onto Wall Street’s overnight gains after crude prices notched their biggest one-day surge on record, helping offset concerns about the depth of a global recession. Despite the rally in stocks, investors still sought the safety of the U.S. dollar and government bonds as an unprecedented number of Americans – 6.6 million – filed jobless claims due to coronavirus-induced lockdowns, as economic concerns stayed front and center. U.S. stocks rallied after U.S. President Donald Trump said he expects Russia and Saudi Arabia to announce an oil production cut of up to 10 million to 15 million barrels as the two countries signaled willingness to make a deal.

U.S. Stocks Rally Along With Oil; Treasuries Fall: Markets Wrap

(Bloomberg) — U.S. stocks rallied, boosted by energy shares as oil surged after President Donald Trump said Russia and Saudi Arabia would cut production. Treasuries fell and the dollar rose.The S&P 500 advanced for the first time in three days, with Chevron Corp and Exxon Mobil Corp. among the top gainers. Shares rebounded after falling 6% over the past two days. Consumer discretionary stocks weighed on the benchmark after jobless claims doubled from last week to 6.6 million.West Texas crude gained 22% after Trump said he expects the two countries to cut output following a conversation with Crown Prince Mohammed Bin Salman on Thursday. But oil came off its highs after officials from both sides watered down expectations. The commodity is still down around 60% for the year. After enduring their worst quarter since 2008, stocks are struggling for traction as companies move to slash dividends and more U.S. states enact severe restrictions on movement to curb the Covid-19 pandemic. Initial jobless claims Thursday that showed record high numbers emphasized the uncertainties surrounding the economic toll. However, rebounding oil prices could help damp the impact by buoying a beaten up sector of the economy.“The reality is, there’s no amount of stimulus to spur demand growth until the population is back outside of their homes interacting with society,” said Jeff Klingelhofer, co-head of investments and portfolio manager at Thornburg Investment Management, which has about $37 billion in assets. “I think that we’re in for a period of high volatility for quite some time to come.”These are the main moves in markets:StocksThe S&P 500 Index rose 2.3% of 4 p.m. New York time.The Nasdaq Composite Index rose 1.7%.The Stoxx Europe 600 Index gained 0.4%.The MSCI Asia Pacific Index fell 0.6%.CurrenciesThe Bloomberg Dollar Spot Index climbed 0.5%.The euro declined 1% to $1.0852.The British pound rose 0.2% at $1.2399.The Japanese yen fell 0.7% to 107.92 per dollar.BondsThe yield on 10-year Treasuries increased three basis point to 0.61%.Germany’s 10-year yield rose three basis points to -0.43%.Britain’s 10-year yield climbed two basis point to 0.33%.CommoditiesGold rose 3.1% to $1,640.80 an ounce.West Texas Intermediate crude increased 22% to $24.72 a barrel.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

Asian Shares Mixes After IMF Issues Warning

The Australian share market finished lower on Thursday with most of the selling pressure coming from weakness in the major banks. Traders said the sell-off was fueled by comments from the International Monetary Fund (IMF), calling for governments to enact wartime measures to fight the coronavirus pandemic.

Dow Futures Gain As Weekly Jobless Claims Surge to 6.6 Million; Oil Rebounds

More than 6.6 million Americans likely filed for jobless benefits last week, more than double Street forecasts. Oil prices surge overnight.

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From Panic to Rebuilding?

US indices ended Wednesday with a 4.4% loss on S&P500; and Dow Jones. Trump’s warning of horrors to come caused pressure on the markets and became an unexpected pressure factor for the market.

India’s March factory activity growth at four-month low amid coronavirus spread

India’s manufacturing activity expanded at its slowest pace in four months in March and is likely to get worse as demand and output take a hit from the coronavirus outbreak, putting a severe dent in business optimism, a private survey found. A 21-day nationwide lockdown, which started on March 25 in the world’s second most populous country, is expected to deliver a heavy shock to the economy despite massive fiscal and monetary support packages by the government and the Reserve Bank of India last week. The Nikkei Manufacturing Purchasing Managers’ Index, compiled by IHS Markit, declined to 51.8 last month from February’s 54.5, its lowest since November but still above the 50-mark that separates growth from contraction for a 32nd month.

Asian stocks little changed as fear descends on global market

Asian stocks were meandering Thursday after a White House warning that as many as 240,000 Americans might die of the coronavirus sent Wall Street tumbling and signs of the outbreak’s global economic cost increased.

A Choppy Day Ahead, with U.S Weekly Jobless Claims the Only Distraction

A quiet day on the economic calendar leaves the majors in the hands of government chatter and news updates on the coronavirus once more…

Homeowners Should Only Pay This Much for Home Ins.

Delaware homeowners should read this! New “Tool” uncovers how much you should really pay for home insurance. Insurers hope less people know about this.

Nikkei 225 Trading

Trading the Nikkei225 Binary Option

The Nikkei 225 index is the stock exchange of Japan, and it is traded as a derivative asset in the binary options market. It is sometimes known as the Japan Index on trading platforms like that of Betonmarkets.

To understand how the Nikkei 225 operates, let us get some facts about the Japanese economy. Japan is an export-oriented economy, with most of its exports going to the United States. This ties the performance of the Japanese economy to the performance of the US economy. As such, we see the Nikkei 225 index moving almost in total correlation to the US stock markets.

A historical study will show that the performance of the Nikkei 225 on a trading day mirrors the performance of the Dow Jones index on the previous trading day. This factor alone can be used by traders to glean dollar after dollar of pure profit by knowing just how to play the Nikkei 225 based on the previous performance of the Dow Jones index. Here are a few tips to make money trading the Nikkei 225 binary options contract.

What to Trade

Pay particular attention to the following news releases from the US:

a) Non-Farm Payrolls report

b) US GDP report

c) US retail sales

d) Consumer sentiment reports

e) Manufacturing data

There is perhaps no other data that affects both the US and the Japanese markets like the US Non-Farm Payrolls report. Take a look at the market response of both the Dow Jones and the Nikkei 225 average to the last NFP report for May, released on June 1, 2020. This report disappointed the markets and sparked off a sell-off on the Dow Jones index. On Monday June 4, 2020, which was the next trading day following the release of the NFP, the Nikkei 225 shed so much value that by Tuesday June 5, 2020, it was trading at multi-year lows. Once the US markets cough, the Japanese markets catch a cold.

Other reports such as the GDP and the retail sales data, all reflect the health of the US economy, which is Japan’s number 1 trade partner. If the US economy is not growing, it will affect its ability to import goods and raw materials from Japan, and this will also hurt sales of imported Japanese products to the US consumers. A bad GDP and retails sales report will lead to sell-offs on Wall Street and corresponding sell-offs in the Nikkei 225 index. A good GDP and retail sales data will lead to gains on both the Dow Jones and Nikkei 225 indices. We also see the same effect from the consumer sentiment and manufacturing data out of the US.

How to Trade the Nikkei 225

If you trade the market open, it is very easy to make money. Once you are armed with the kind of information we have listed above, all you need to do to make money from the Nikkei 225 is to exclusively trade the market open. The first hour of trading is usually a response to the events in the US markets the previous day. So what you should trade is the MARKET OPEN and not the market close.

Compile your trade component on Option Builder, and set your expiry to correspond to 15 to 30 minutes after the Nikkei 225 open. So check your time zone and set the trade to expire within 15 to 30 minutes of the Nikkei 225 open. By the time the trading day wears on, other factors will come into play which may affect the market close.

So in trading the Nikkei 225 binary option, trade the market open according to the guidelines we have stipulated above.

Trading the Nikkei 225 – A Beginner’s Guide

The Nikkei 225 is a price-weighted stock index or stock average of the top 225 blue chip stocks listed on the Tokyo Stock Exchange. The Nikkei can be compared to the Dow Jones Industrial Average Index of the United States.

History of the Nikkei 225

The Nikkei derives its name from the Nihon Keizai Shimbun (Nikkei) newspaper which has been calculating the index on a daily basis since September 7, 1950. The index was calculated back retroactively to May 16, 1949.

The Nikkei was established in the time when Japan was industrialized and rebuilt after the Second World War.

Major Events in the History of the Nikkei 225

Between 1985 and 1990 there was a major asset bubble in the Japanese economy. During this time, stock prices and real estate values tripled. When the bubble burst, the Nikkei lost more than 33% of its value in less than a year.

This decline continued until October 2008 when the Nikkei had lost more than 80% of the value it had in December 1989 when it established an important high.

After a long period of sideways consolidation which lasted for about 4 years, the Nikkei rebounded sharply, fueled by economic stimulus by the Bank of Japan and the Japanese government, and gained an impressive 150% between June 2020 and June 2020.

At the moment (2020/03/04), the Nikkei is trading at 21,189, which is above the important high which was set back in June 2020.

A highly mechanized factory in Japan.

How to Trade the Nikkei 225

Although there are other ways to trade the Nikkei, we’ll focus only on how it’s done on retail forex trading platforms.

Pip Value of the Nikkei 225

One index point (1.0) is worth 1 Japanese yen. Therefore, the pip value (or point value) of 10 Nikkei contracts is 10 yen.

The pip value of a 10-contract trade size is always 10 Japanese yen no matter what the price of the index is. This is because the index is quoted in yen.

However, the pip value in U.S. dollar is dependent on the USD/JPY exchange rate. Therefore, the Nikkei’s pip value in USD is dynamic. To calculate the pip value of a 10-contract trade on the Nikkei in USD, simply divide 10 yen by the USD/JPY exchange rate: 10 yen divided by 111.280 equals $0.0896. Let’s round this number to $0.09.

The Nikkei and USD/JPY pip value calculations are the same. If you’d like to learn more about trading the USD/JPY, here is a link to an article dedicated specifically to this pair: Trading the USD/JPY Currency Pair.

Nikkei 225 Contract Size

With many forex brokers, the minimum number of Nikkei contracts you can trade is 10. Some brokers have a maximum amount of contracts per trade, like for example, 1000. You can usually only trade increments of 10 contracts.

The notional value of 10 Nikkei contracts is ten times the current price of the index. The current price is 19,680 Japanese yen, so the notional value of 10 contracts is 196,800 yen.

To calculate the notional value in U.S. dollar, simply divide 196,800 by the current USD/JPY exchange rate of 111.280 to get an amount of $1768.51.

Luckily, you don’t need $1768.51 to buy or sell 10 Nikkei contracts. You should be able to trade with at least 1:100 leverage, which means you’ll have to put down a small amount of less than $18.

One of my brokers has a minimum trade size of 100 contracts on the Nikkei. They offer 1:200 leverage, which means you need about $88.50 to open a 100-contract position.

Of course, you need additional equity to maintain the position once it is open because any floating loss needs to be supported by free (available) margin.

Profit and Loss Calculation

Here at FX Leaders, we go the extra mile to offer traders the best forex signals possible. In 2020 alone, we bagged a phenomenal 2,118 pips!

We have recently added some really exciting financial instruments to our signals program which include gold, crude oil, and a powerful equity index – the Nikkei 225.

I can’t wait to see the first 6 months’ Nikkei signals data, as this volatile instrument has great potential to boost the number of pips we make. Let’s look at how to calculate profits made on Nikkei trading signals, with a simple example:

Let’s calculate how much you’d make if you bought 160 Nikkei contracts at 19,500 and hit an 80 point/pip profit target at 19,580. Let’s suppose the USD/JPY exchange rate remains close to 111.111 for the duration of the trade. Let’s also assume your trading account’s base currency is U.S. dollar.

The pip value is $0.09 because the USD/JPY exchange rate is 111.111. This is the pip value of a 10-contract position size.

The trade size we’re looking at is 160 contracts. Thus, the pip value on this trade is 16 X $0.09 = $1.44. Simply multiply this by 80 pips and you’ll get an amount of $115.20.

Instruments Correlated to the Nikkei 225

Correlated Currencies

The Japanese yen has a strong inverse correlation to the Nikkei 225. Thus, the USD/JPY is positively correlated to the Nikkei, with a one-year correlation of 0.89. The yen usually affects the Nikkei.

The reason for this causation is that a weaker yen helps Japanese exports. For example, the stock prices of the major auto companies in Japan tend to move higher when the yen weakens. There are several large auto companies listed on the Nikkei.

A Toyota FJ Cruiser.

Many companies listed on the Nikkei 225 are large exporters of manufactured goods like different kinds of machinery and vehicles. A weak yen tends to boost the profitability of these companies tremendously.

Although the yen usually affects the Nikkei, the latter can also have an effect on the yen, of course. Or perhaps I should rather say, the Nikkei together with the other major benchmark equity indices can affect the Japanese yen.

You see, the Yen is a safe haven currency which tends to appreciate when investors get frightened and reduce their exposure to riskier assets like stocks.

This, and the fact that the yen is an important funding currency, often causes funds to flow from stocks back into the yen which was used to buy these stocks in the first place.

You see, the cost of lending yen is minute because of its ultra-low interest rate. Therefore, it can be very lucrative to use yen to buy riskier assets with a higher yield.

The ‘problem’ is, when investors reduce their exposure to these risky assets, the funds need to be repatriated to the Japanese yen. This can cause the Nikkei and other indices to decline while the Japanese yen rises simultaneously.

The Nikkei is positively correlated to all the Japanese currency pairs to a certain degree.

Correlated Equity Indices

The most important index to watch when you’re trading the Nikkei is probably the Dow Jones Industrial Index of the United States.

If the Dow performs well on a particular day, the Nikkei tends to follow suit the next day. Conversely, a bad day for the Dow often means the Nikkei could trade lower the next day, especially early in the Japanese business day.

A factory in the Japanese Keihin industrial region.

You see, the Japanese economy runs mainly on exports and most of these exports go to the United States. Therefore, the Japanese business world is affected directly by the state of the American economy.

The Nikkei is consequently highly correlated to the Dow (0.93) and other U.S. equity indices like the S&P500 (0.90) and the Nasdaq (0.84). The numbers in brackets are the one-year correlations to the Nikkei 225.

The Nikkei 225 is positively correlated to most of the major global benchmark equity indices. Some more examples include the German Dax (0.92), Australia 200, and the French CAC 40 (0.90).

Major Events that Impact the Nikkei 225

Of the many economic and political events that influence the Nikkei, there are a few that can cause substantial volatility in this equity index.

1. Monetary Policy – Actions and Comments by the Bank of Japan and the Federal Reserve

Monetary policy is certainly one of the most important drivers of the Nikkei. The Bank of Japan (BOJ) is in charge of Japan’s monetary policy and enforces the Japanese government’s economic policies.

Likewise, the Federal Reserve of the United States governs the monetary policy in the U.S.

Actions taken by the Bank of Japan to maintain the stability of their country’s financial system can cause violent moves in the Nikkei, like for instance, the positive effect that quantitative easing has had on this stock index in recent years.

Like I already mentioned, the Japanese economy is largely dependent on the U.S. economy. Therefore, the United States Federal Reserve (FED) also plays an important role in the price of the Nikkei.

For example, actions taken by the FED to tighten economic reins, like an interest rate hike, can strengthen the U.S. dollar. The USD/JPY could consequently move higher, which is usually good for Japanese exporters and of course, the Nikkei.

2. Major Political Events

Major political events can cause massive moves in the Nikkei. The U.S. presidential election where Donald Trump took the victory is one such example. The effect of this election resulted in a massive daily candle on the Nikkei, with a range of 1300 points.

Of course, the Brexit vote in June 2020 also caused great volatility in the Nikkei which printed a bearish candle of almost 1700 points, declining with other global benchmark indices.

3. Natural Disasters

Earthquakes frequently occur in and close to Japan. The Nikkei doesn’t react well to natural disasters that damage the country’s industries and infrastructure.

4. Economic Indicators

Economic indicators are used to analyze how well a country’s economy is performing, and to predict future economic growth. There are three main categories of economic indicators, namely, leading, lagging, and coincident indicators.

Indicators like GDP numbers (Gross Domestic Product), CPI numbers (Consumer Price Index), interest rate decisions, the unemployment rate, wage growth, industrial production, and retail sales numbers, are regularly released in both the U.S. and Japan.

Although these aren’t the only important economic indicators, they have great potential to move the Nikkei and U.S. equity markets; especially interest rate decisions, GDP and CPI numbers, and labor market data (like the U.S. nonfarm payrolls numbers, unemployment rate, etc.).

Economic news out of both Japan and the United States can move the Nikkei considerably.

The Nikkei is considered to be one of the most volatile benchmark equity indices. Keep this in mind when you trade it!

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Thank you for visiting the FX Leaders website. Good luck with your trading!

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