The Japan 225 is the major stock market index for the Japanese markets, centred in Tokyo, Japan. It’s also sometimes called the Nikkei 225, or simply Nikkei, being named after the newspaper which invented it many years ago. The Western world uses a lot of Japanese products, so there are many recognizable names of companies in the list of 225 that make up this index. For instance, there are Mitsubishi, Honda, and Toyota from the automobile industry, and Panasonic, Sony, and Sharp from the electronics side.
This being so, the market is affected by world events significantly, and by how other economies such as the Western economies are doing. This tends to make the Japan 225 a volatile index to spread bet on, which makes it an excellent choice for spread betting, where you can profit just as easily from a drop in prices as from a rise.
Like the Dow Jones industrial Average, the Japan 225 is a price weighted index which means that the companies with the more expensive stocks have a bigger influence on the value. Each stock will affect the index in proportion to its price. So ¥100 (100 yen) stock will have 10 times the effect of a ¥10 stock.
Another entertaining thing about the Japan 225 is that the market is open at a different time from Western markets, so the live movements of the index are time shifted compared to the markets you may be used to. They always seem to be some fluctuations in the markets at particular times, such as the market open and just before the market closes, and you will be able to catch these without being distracted by the Western indices.
The Japan 225 started in 1949, and has been as high as nearly 40,000, but at present runs between 8000 and 9000. It dropped more than 1000 points as a result of the earthquake and tsunami in early 2011. You can look forward to a good deal of volatility when you spread bet on this index.
That being said, you need to stick with your trading plan if you want to spread bet the Japan 225. In particular, you must concentrate on minimizing your losses for the bets that go in the wrong direction, and that means closing the bet quickly once you can see that what you thought was going to happen has gone away.
Japanese industry has had a chequered reputation and acceptance in the Western world. It has gone through times when it has been it immensely popular, and other times when there has been a reaction and revolt against other than home produced equipment. The size of Japanese industry means that it is increasingly almost impossible to compete with it on a level basis, but Japan has responded by setting up plants in countries where it has a significant market share, bringing local work. As part of the worldwide economy, the Japan 225 index is an important world economic indicator, and well worth spread betting.
“Japan’s economy has struggled with deflation over the past 20 years. However, recently they have also been fighting an over-valued currency which has eroded a healthy trade surplus and replaced it with a rare era of trade deficits. Weakening the yen and stimulating inflation has been the answer and some bold action has been taken with the intention of killing two birds with one stone.”
Japan 225 Spread Betting
The Japan 225 may be the leading Asian stock market index. It’s also sometimes called the Nikkei, and the 225 companies in the index represent many household names. The current quote for a daily funded bet, which automatically rolls over at the end of each day, is 8838.5 – 8846.5.
Seeing that it has been as high as 8950 today, you decide to take a “short” bet on it, thinking that the downward trend will continue. You bet £6 per point that the index will go down, and as this is a “sell” bet it is placed at the price of 8838.5.
A little while later, you see that your spread betting provider is quoting 8748.6 – 8756.6, and you decide to close your bet, which is at the “buying” price of 8756.6.
To work out what your profit is, you first have to figure out how many points you gained. Remembering that you bet on the index to fall, you have gained 8838.5-8756.6, which is 81.9 points.
Your bet was placed for an amount of £6 per point so your winnings can be calculated as 81.9 times £6, which is £491.40.
The way that you selected your bet on this index seems to be casual, and not according to any trading plan. Therefore you shouldn’t have been surprised if, instead of continuing to drop, the index went back up when you placed your bet, putting you in a losing position.
Say the index went back up to 8869.2 – 8877.2, and you decided that you had better close the bet before you lost any more. The bet closes at 8877.2, and the total number of points that you lost is 8877.2-8838.5, which is 38.7 points. Multiplying this times your £6 stake, you find that you have lost £232.20.
Looking now at the futures bet, the current quote has a spread of 20, from 8797.5 – 8817.5. You decide that you think the index is going up over time, and place a long bet at 8817.5 for £12 per point.
If all goes well, the index may go up and you decide to close your bet when the quote is 8982.1 – 9002.1. The bet closes at 8982.1. You can calculate your winnings like this: –
Number of points you gained is 8982.1 less 8817.5.
Total number of points you gained is therefore 164.6.
You bet at a level of £12 per point, therefore you have won 164.6 times £12, which is £1975.20.
But as you should know, sometimes things do not go as you plan, and sometimes your spread bet will not win. Perhaps after you place this bet the index drops to a value of 8742.6 – 8762.6. Fearing that it is going to fall further, you decide to cut your losses and close your bet, which you do at the selling price of 8742.6.
You must now work out how much you have lost. You open the bet at 8817.5, and closed it at 8742.6, which means you lost 74.9 points. As you bet £12 per point, the total amount you have lost is £898.80.