Nikkei is an important Forex index that investors should know. However, not everyone understands this indicator clearly. So what is Nikkei 225? What are its characteristics and implications for investors? Let’s join Forex Trading in the technical analysis of the Nikkei index along with the significant benefits it contributes to investors in the Forex foreign exchange market.
What is the Nikkei index?
Nikkei What are indicators? This is the main measure of the Japanese Forex market. It reflects the performance of leading enterprises in this country’s economy. Its full index is Nikkei 225. Nikkei Asia reflects the value of the top 225 companies in Japan. It is allowed to be traded on the Forex Tokyo exchange. Nikkei 225 is considered equivalent to the Dow Jones Industrial Average in the US. Investors use this index to monitor fluctuations in the Japanese Forex market. At the same time, it also helps to better understand the general trend of the global Forex market.
Technical analysis via Nikkei 225
Nikkei 225 is a key tool for understanding the Japanese Forex market. It reflects the performance of leading businesses such as Canon, Sony, and Toyota Motor Corporation. Nikkei sorts companies by stock price instead of market capitalization. The index is rebalanced annually in September, with adjustments made in October.
Nikkei 225 is also an important factor in technical analysis. This is the underlying asset for derivative contracts. Fluctuations in the Nikkei index often indicate Japan’s economic trends. Nikkei 225 is an important source of information for investors both in Japan and globally.
See more: Indicator- Increase ability analyze and forecast exact
Common points of Nikkei Index 225
Nikkei is one of the key tools for measuring Forex market activity. Investors need to grasp some important characteristics as follows:
- Leading companies represented in the Nikkei: Canon Incorporated, Sony Corporation, and Toyota Motor Corporation. These businesses are widely known globally. They are famous for their iconic products and huge scale of operations.
- Nikkei is one of the most important and historical Forex indices. Especially in assessing the situation of the Asian Forex market.
- Nikkei was born as part of the effort to reset the economy. At the same time, it promoted the industrialization of Japan after the end of World War II.
- Today, stocks in the Nikkei are sorted by their price, instead of being based on market capitalization like many other Forex indices.
- Nikkei is reassessed in September each year. Necessary adjustments were then made, made in October of that same year. Similarly, the VN30 stock basket representing the UK market is also reviewed and adjusted periodically every 6 months. Or around January and July every year.
What does the Nikkei index mean in technical analysis?
Nikkei plays an important role in reflecting the state of the Japanese Forex market. It has a great influence on the underlying Forex market. In addition, this index also opens up many opportunities for Forex derivative contracts. Specific meanings of Nikkei include:
- Nikkei 225 is considered a standard index that comprehensively reflects the operating situation.
- Investors use the Nikkei 225 to determine the list of the top 225 stocks in the Japanese market. From there, choose the stocks they want to monitor and add to their investment portfolio.
- The Nikkei index provides an overview and continuous updates on market fluctuations. They help investors adjust their strategies appropriately. Factors affecting the Nikkei are indicators of the economic situation in Japan.
- Nikkei also serves as the underlying asset for derivatives contracts. It creates conditions for Forex investors to trade derivative contracts in the most effective way.
Some factors to consider affecting Nikkei index Asia
Nikkei is governed by many different factors. In particular, its fluctuations directly impact the Forex market. Below are the main factors influencing Nikkei :
Monetary value
Because stocks in the Nikkei 225 are priced in Japanese Yen. So the fluctuations of this index are closely related to the Yen exchange rate. When the Yen increases in value, the Nikkei tends to decrease. Conversely, when the Yen depreciates, the Nikkei usually increases. This happens because when the Yen strengthens, the value of Japanese exports also increases. This makes the country’s products less competitive in the international market.
That leads to reduced profits for companies. The consequences lead to a decline in stock prices and a negative impact on the Nikkei 225. On the contrary, when the Japanese Yen exchange rate is low, demand from the international market increases. This will help Japanese goods become more competitive and company profits will also increase. At the same time, it causes stock prices to go up. As a result, the Nikkei 225 also tends to increase.
The market economic situation affects the Nikkei index
Any small fluctuation in the market economy can affect the Nikkei index. It includes fluctuations in stock prices. At the same time, when the economy is on the rise, demand for jobs will increase, leading to increased consumer spending. It promotes the growth of certain stocks directly related to human resource needs.
Natural disasters affect technical analysis
Japan is one of the countries most affected by natural disasters. These include floods, earthquakes, tsunamis, and hurricanes. These uncontrollable factors directly impact the Nikkei 225.
A typical example is 2011 when the Tohoku earthquake and tsunami caused serious consequences for the Japanese economy and society. During this time, the Nikkei decreased by 7% continuously in the following days.
Increase and decrease policy of the Bank of Japan
Nikkei 225 is also affected by the policies of the Bank of Japan. At the same time, it is affected by regulations from state agencies. They affect interest rates and spending levels of businesses in the Forex market. Consumer purchasing power is affected by banking policy. This affects the value, revenue, and stock price of listed businesses.
How to calculate Nikkei accurately
Nikkei 225 is always considered and regularly updated. It displays in real-time on the electronic board during Forex trading hours on the Tokyo floor. The commonly used index calculation formula is:
Nikkei index 225= (Total capitalization value of 225 companies listed on the exchange / total market capitalization value) x general index of the entire market.
Each year, a list of 225 top businesses is evaluated and selected. The calculation result from the formula will provide information about the Nikkei. This helps investors have an overview of the market situation. They can use the index to consider situations such as stock splits or mergers.
How to analyze forex techniques to invest effectively according to Nikkei Index 225
Whether you are a new or experienced investor, there are many ways to participate in the Japanese Forex market. These are popular methods for trading the Nikkei 225. They range from contracts for difference to ETFs. At the same time, there are benefits you can get from analyzing this index.
Along with that, we will provide information about transaction times and important notes. They can help you make effective investment decisions.
Details about the trading form of the Nikkei Index 225
Investors can consider investing through the following methods:
- Invest through spreads of Nikkei 225 CFD
This is a financial method that allows investors to profit from fluctuations in the Japanese Forex market. It happens whether in an up or down direction. In other words, if investors predict the Nikkei 225 will rise, they will open a long position. On the contrary, if they believe that the index will decrease, they will open a short position. A notable point of this investment form is that participants do not actually own the shares. They only trade based on price differences.
- Invest directly through Nikkei futures contracts
A futures contract is a standardized agreement between parties. They allow the buying and selling of assets. Here is the Forex Nikkei 225 index, with a predetermined fixed price. The amount of assets in the contract is constant. The contract will be performed at a certain time in the future.
- Invest directly in the Nikkei 225 ETF Fund
The Nikkei 225 ETF may be a safer option. This fund operates by buying stocks according to the list of 225 companies in the Nikkei 225. The purpose is to replicate the performance of this index. The fund then issues ETF certificates to investors. In particular, it allows them to participate in the Forex market without directly buying individual stocks.
What are the benefits of forex technical analysis according to Nikkei 225?
You need to have a clear plan and understand the benefits you can receive. Specific benefits include:
- High liquidity: Nikkei is the leading Forex index in Japan. Therefore, they can invest in stocks belonging to this index group. Or they can go through other indirect investment methods. Investors can still rest assured about liquidity.
- Many great opportunities: Nikkei 225 is one of the most volatile Forex indexes. It is affected by many factors such as currency exchange rates and central bank policies. Therefore, sharp investors have many opportunities to participate in the market. They can then take advantage of times that have the potential to bring high profits.
- Close connection with other asset classes: Nikkei 225 often reflects the Forex market trend of the Dow Jones index (DJIA) in the US. In addition, the Nikkei 225 also has a negative correlation with the Japanese Yen. This helps investors when they want to diversify their investment portfolio.
See more: XTB: The most reputable and quality broker in UK
Some points to note about when to start trading
The top 225 Nikkei 225 companies are all listed on the Tokyo Forex exchange. Official operating hours are from Monday to Friday every week. With trading hours from 9:00 to 11:30 am and from 12:30 to 3:00 pm (Japan time GMT+9).
Epilogue
This article has provided a comprehensive overview of Nikkei 225. It covers from basic characteristics, to how it works. Including the influencing factors and benefits of investing according to this index. So you know how to use Nikkei 225 for technical analysis and selection of derivative contracts. At the same time, you can evaluate the Japanese Forex market. That is what Forex Trading wants to provide about the Nikkei index. Please follow Forex Trading to update new fluctuations on the Nikkei index 225!
Questions related to Nikkei
What aspects directly affect Nikkei?
Nikkei is affected by many influencing factors. These include the Bank of Japan’s monetary policy, fluctuations in the Yen, global economic conditions, and domestic events such as natural disasters or political upheaval.
How to invest according to Nikkei?
There are many ways to invest in Nikkei. It includes buying shares of companies in the index and investing in ETFs that track the Nikkei 225. Or trading derivative contracts such as futures and contracts for difference (CFD).
Why is the Nikkei important to global financial markets?
Because it represents the world’s third-largest Forex market. At the same time, it is the main measure of the Japanese economy. Nikkei volatility can impact other markets. Especially in the context of an increasingly connected global economy.
