The Nikkei 225 is the primary stock exchange in Japan. In order to understand how this index functions, you’ll need to be at least somewhat familiar with the Japanese economy. Japan has an economy which is heavily reliant upon its exports, most of which make their way to the United States. This links Japanese economic conditions to those of the United States economy. Consequently, traders often notice the Nikkei 225 index value moving in the same direction as the U.S. marketplaces.
Often, you’ll see the Nikkei 225 performing in almost the exact same manner as the Dow Jones did the day prior. This knowledge alone can provide binary options traders with plenty of profit. It a way, it’s almost like having a crystal ball to tell you what the Nikkei 225 is going to do the next day. There are other U.S. based factors to consider though, such as NFP reports, GDP, retail sales, manufacturing statistics, and consumer reports. Of these, the NFP (non-farm payroll) report tends to have the largest impact on the Nikkei 225.
GDP and retail sales do reveal overall U.S. economic conditions and health. Keep in mind that the U.S. is Japan’s top trading partner. When the U.S. economy is stagnant, this will decrease the importing of Japanese goods, thus deflating the sale of Japanese merchandise to U.S. buyers. Negative GDP and/or sales reports lead to Wall Street selling and similar selling within the Nikkei 225. A favorable GDP report and/or sales data should result in gains for both the Dow and Nikkei indices. Watch for the same effect to occur whenever consumer and manufacturing reports are released.
When the the Nikkei 225 opens for trading the activity during the first hour is typically a response to what transpired within the U.S. marketplaces during the previous trading day. This means that you’ll want to be trading around the opening, not closing, hour if you want to trade based upon what you already know about U.S. market performance. The simplest strategy for trading this index would therefore be to research U.S. market performance and then enter into your digital options trade just after the Nikkei 225 opens for trading.
As the trading day presses on, other factors will influence the value of the index. At that point, different analysis will be necessary. Most digital options traders know that this basic strategy is the strongest, since the U.S. markets are able to tell you almost all there is to know about what the Nikkei 225 is going to do during its first hour or so of market trading.