The Nikkei 225® futures are a popular global stock index for day traders and other short-term traders. It is an index of 225 of the top companies traded on the Tokyo Stock Exchange and allows traders outside Japan to take positions based on their views of the Japanese economy and market.
Traditionally, traders have used stock index futures and more recently, ETFs as financial instruments for trading stock indices. As with any kind of futures trading, stock index futures trading can involve
- relatively high account balance minimums
- the possibility of unexpected losses
- margin calls
- the need to use stop-loss orders to manage risk
Nadex binary options and option spreads offer a new, possibly better way for individual traders to day trade the Nikkei 225® and other US and international stock indices.
What is a stock index like the Nikkei 225® and why trade it?
An index is a weighted average. A stock index like the Nikkei 225® reflects the performance of Japanese companies traded on the Tokyo Stock Exchange. Since many of these firms are not publicly traded on US or European exchanges, Nikkei index futures are popular among international traders who want to trade the stock market of the world’s third-largest economy.
When you trade an individual stock, your fate is tied to that of one company. That can be a good strategy, but you also face the risk that a particular company can run into trouble because of, say, a lost government contract, mismanagement, or competition, even while the rest of the sector does well. Trading a stock index lets you take a position on the sector or overall market.
Nadex is designed for day trading stock indices like the Nikkei 225®
Nadex binary options and option spreads are designed for trading short-term moves in markets like the Nikkei 225®, which can go through alternate phases of being volatile one day and quiet and range-bound another. With durations from 20 minutes to one week, these contracts let you trade without worrying about some of the downsides associated with futures trading:
- Minimum opening balance is just $250
- All binary options cost less than $100 each
- You set your maximum possible loss and profit before each trade, so you never lose more than you planned for
- As a result, you don’t need a stop-loss and you can never get a margin call
Why US traders like day trading global indices like the Nikkei 225®
Although US stock indices like the Dow® and Nasdaq® each have their own personality (the Nasdaq tends to lead, the Dow® can react dramatically), they all reflect the US market. For many traders, that’s not enough. They want to trade the world. And on Nadex, you can. Plus, the Nikkei has qualities which some traders find more suitable to their personality and trading strategy.
The equities which make up the Nikkei 225® are valued in yen and their shares are priced in yen. Because the yen is so important in forex trading, currency traders also keep an eye on global stocks. Remember, on Nadex you can trade forex and stock index futures side-by-side from the same account.
What’s more, the Bank of Japan has kept interest rates extremely low and even negative, which in turn creates a somewhat different economic environment for Japanese firms. Traders looking for a price chart that looks very different from the Dow® or Nasdaq® are often drawn to the Nikkei.
Others look to trade the Nikkei just because they want another highly liquid market to diversify or simply try something new. It also doesn’t hurt that the Nikkei it is most active during the when it’s nighttime in the US, perfect for evening traders.
Nadex traders can use binary options and options spreads to trade the Nikkei when US indices aren’t attractive. If the US stock market is simply not doing anything that you want to trade, this the Nikkei can be a breath of fresh air and trading it takes the same few steps as any other market on Nadex. You can use a variety of strategies, trading out-of-the-money binaries with a low initial cost or trend-trading using spreads.
Day Trading the Nikkei 225® on Nadex is Different
Nadex binary options and option spreads offer an affordable way to try a variety of Nikkei 225® trading strategies and add them to your portfolio. You choose your maximum profit and loss up front, before you place the trade. You don’t have to worry about unexpected losses or margin calls, as you may find in other kinds of stock or futures trading. And you get risk management without needing to set a stop-loss.