Academy How to trade Nikkei 225

Nikkei 225 Index – Definition and Characteristics

The Nikkei 225 is a stock market index for the Tokyo Stock Exchange. It is a price-weighted index, meaning the higher the stock price of any company, the larger the impact on the index. As of early 2022, the company with the most significant influence on the index is Fast Retailing. However, one of the disadvantages of the price-weighted calculation is that it does not take the company's entire market capitalization into account. For example, Fast Retailing Ltd makes up 11.2% of the whole index, and Toyota Motor Corp makes up just 1.2% despite being more than four times more valuable than Fast Retailing.

Other famous firms included in the index are Sony, Softbank, Mitsubishi Financial Grou, Daikin, Honda, Mizuho Financial Grou, Panasonic, Canon, Nissan, and others.

The highest sector weighting belongs to Information Technology, with a 25% share in the index. The second one is Industrials with a 20% share, and the third one is consumer discretionary with 19%.

The index is denominated in the Japanese Yen, and the companies in the index are reviewed every year.
The index began its journey on 9 July 1950, several years after World War II, when the Japanese economy started to recover from the damage caused by the war.

Specification of Trading Instruments

Symbol

Swap long

Swap short

Swap type

Contract size

Min. trade size

Tick size

Tick value

Dividend charges

NIKKEI

-2.86

-2.64

by interest

0.01

1000

Performance

The performance of the Nikkei stock index has been influenced by the Bank of Japan's ultra-lose monetary policy. From 2013 to 2017, The BOJ owned circa 75% of all Japanese Exchange Traded Funds ("ETFs") and is a top 10 shareholder of 90% of the Nikkei 225 constituents. As a result, the index rose above the psychological level of 30,000 JPY in February 2021 and printed 30-year highs. However, since then, it has started to create lower lows and lower highs, indicating a bearish trend, which might continue.

Nevertheless, the Nikkei remains 50% higher when compared to the price in January 2015. On the other hand, it underperforms US equities by a lot, but short-term traders should welcome its volatility.

_{Source: Purple Trading Metatrader 4}

Nikkei 225 - quotes and trading

You can trade the technology index - Nikkei 225 index in our Purple Trading Metatrader 4 platform. First, find the ticker NIKKEI in the Metatrader 4 platform and press the new order button. The following window will pop up.

^{Source: Purple Trading Metatrader 4}

Lot value calculation

When you click on the NIKKEI ticker in our Metatrader 4 platform, you can see that the spread between the Ask and Bid price is circa 9.00 JPY during the times of high liquidity (usually when London and New York are open for trading).

The minimal volume for this index is one micro lot (0.01). If you trade a mini lot (0.1), you will gain or lose 100 JPY for each JPY the index makes. When trading half a lot, each JPY of the index movement will yield 500 JPY of profit/loss. For example, you buy half a lot at 27,000 JPY, and the index goes to 27,100 JPY. Your total profit will be 50,000 JPY (calculated as 100 JPY movement * 500 JPY profit per each JPY of the move). The same logic applies to calculating your profit or loss when entering a short position.
Keep in mind that this index is quoted in JPY; thus, if your account is in EUR or USD, your profit or loss will need to be calculated into USD or EUR, according to the actual EURJPY and USDJPY rate.

As with everything, you can trade at the current market price (market execution) or use pending orders (limit and stop orders). It's unnecessary to enter the stop-loss and take-profit order right now – you can open the trade without them and add them later.

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