Watching the Nikkei 225 for Day Trading: How to Use Indices to Determine When to Buy and Sell

1. Check Nikkei 225 futures before the market opens

In day trading, you prepare before 9:00 AM.

Before the market opens, I

check Nikkei 225 futures

.

For example,

after the cash market closes the previous day,

if US stocks rise significantly,

and Nikkei 225 futures also rise,

then

the Nikkei 225 may open higher the next morning.

Conversely,

if US stocks plummet,

and Nikkei 225 futures also drop significantly,

then

Japanese stocks may also have a weak opening.

However, high futures do not necessarily mean you should buy.

This is important.

For example,

Nikkei 225 futures are up 800 yen.

“Today is strong!”

you think, and buy at 9:00 AM.

However,

after the market opens,

+800 yen
↓
+500 yen
↓
+200 yen

it plummets.

Individual stocks are sold off along with it.

This kind of thing happens.

In other words,

futures before the market opens are just a predictive factor, and the actual price movement after 9:00 AM is what matters

.

② Watch the initial movement of the index when it hits 9:00 AM

After the market opens,

check whether the Nikkei 225

is heading up

or heading down.

Confirm this.

For example,

Opens high
↓
continues to rise

then,

there is a possibility that a strong market sentiment is continuing.

On the other hand,

Opens high
↓
immediate sharp drop

then,

it could be a ‘yori-ten’ (opening high and falling).

there is also a possibility of.

It is important not to judge based solely on the opening price.

③ Compare the Nikkei 225 with individual stocks

This is the part that I place a lot of importance on.

For example,

Nikkei 225 +1%.

Stock A +1%.

Stock B +3%.

Stock C +6%.

then,

Stock C is significantly stronger than the overall market.

I pay attention to such stocks.

In other words,

the purpose of watching the index is not just to see the market direction.

It also serves as a

benchmark

for measuring the strength of individual stocks.

Strong market sentiment × strong stock

What I find easiest to consider buying is

strong market sentiment × strong stock

.

For example,

The Nikkei 225 is rising.

Semiconductor stocks are also rising.

Among them, Stock A is particularly strong.

Furthermore,

The daily chart is also strong.

It is above the VWAP.

It is bought even on dips.

This is the kind of situation.

I look for

points where the market trend and the direction of individual stocks align.

aim for.

Weak market sentiment × weak stock

It is the opposite for short selling.

For example,

The Nikkei 225 plunges.

Semiconductor stocks are also weak.

Among them, Stock A is particularly weak.

Below VWAP.

Below the 5-minute chart 25MA.

It gets sold off even when it rebounds.

In this case,

weak market sentiment × weak stock

is the situation.

We consider selling into the rallies of such stocks.

The thing to be most careful about is the “opposite direction to market sentiment”

For example,

The Nikkei 225 plunges.

The entire market is weak.

However,

only the stock I am watching is rising.

In this case,

it may be a very strong stock.

On the other hand,

it could also get caught up in a sudden market downturn.

Therefore,

“Just because this stock is strong, it’s fine”

is not how I think.

Why is it strong?

Is there news?

Is the sector also strong?

Is there volume?

I check these things.

Be careful of “stocks that are weak even though the Nikkei 225 is rising”

Conversely,

the Nikkei 225 is rising significantly.

Many stocks are also rising.

Yet,

only stock A is in the negative.

This is,

a possibility of being quite weak

there is.

For example,

Nikkei 225 +2%.

Sector +3%.

Stock A -2%.

In this situation,

the entire market is being bought, but only Stock A is being sold.

I,

place importance on discrepancies with the index like this.

What happens to a weak stock when the market sentiment is strong, if the market sentiment worsens?

This is also important.

Even though the Nikkei 225 is +2%,

Stock A is -2%.

It is already weak.

After that,

the Nikkei 225,

+2%
↓
+1%
↓
±0%

falls to.

Then,

Stock A, which was already weak,

There is a possibility that it will be sold off further.

In other words,

stocks that are weak even in a strong market environment can become even weaker when the market environment deteriorates

.

This is a way of thinking that can also be used when looking for stocks to short sell.

Also look at stocks that are strong even when the market environment is weak

Conversely,

Nikkei 225 -2%.

The entire market is falling.

However,

Stock A +3%.

This is quite strong.

After that,

the Nikkei 225,

-2%
↓
-1%
↓
±0%

rebounds.

Then,

Stock A, which was strong to begin with, may rise even further.

In other words,

stocks that move in the opposite direction to the index are a hint for judging the strength or weakness of the day

is what it becomes.

Look at sectors, not just the Nikkei 225

I do not

rely solely on the Nikkei 225.

For example,

the Nikkei 225 is up 1%.

However,

semiconductors are down 3%.

banks are up 4%.

automobiles are up 2%.

This kind of situation happens.

In this case,

I do not decide to buy semiconductor stocks just because the Nikkei 225 is up.

What is important is

the order of

index → sector → individual stock

.

Think in terms of “index → sector → individual stock”

For example,

Nikkei 225 is strong
↓
semiconductors are also strong
↓
Stock A is strong among semiconductors

then,

it becomes easier to consider buying.

Conversely,

if the Nikkei 225 is weak
↓
and semiconductors are also weak
↓
and stock A is even weaker

then,

it becomes easier to consider short selling.

I look at things

from the big picture down to the small details.

I will observe.

Combining VWAP and Indices

For example,

an individual stock falls to its VWAP.

Normally, this is a situation where you would consider buying the dip.

However,

at that moment,

the Nikkei 225 plummets.

In that case,

there is a possibility it will break below the VWAP.

Conversely,

an individual stock pulls back to its VWAP.

At the same time, the Nikkei 225 rebounds.

The sector also rebounds.

Individual stocks are also bought at the VWAP.

In that case,

it becomes easier to consider it a dip.

Combining the 5-minute 25MA with the index

The 5-minute 25MA is the same.

For example,

a strong stock corrects down to the 25MA.

At the same time, the Nikkei 225 is also pulling back.

After that,

the Nikkei 225 rebounds.

The individual stock also rebounds from the 25MA.

In this case,

the index and the individual stock are moving upward at the same time.

I look for this kind of correlation.

Re-evaluate individual stocks if the index changes suddenly

In day trading,

market conditions can change in a matter of minutes.

For example,

The Nikkei 225 suddenly plunges.

Futures are also falling.

Many stocks are being sold off all at once.

In this case,

if you only look at individual stocks,

thinking, “It was strong until just now, so I’ll hold onto it”

requires caution.

If the market sentiment has changed, you should also re-evaluate your scenario.

“Everything is below VWAP” is a sign of deteriorating market sentiment

I watch multiple stocks.

For example,

if many of the 10 stocks I am monitoring

all fall below their VWAP

at the same time,

this is

not just an issue with individual stocks,

but a possibility that buying across the entire market is weakening.

there is.

Rather than looking at just one stock,

by lining up and watching multiple stocks, it becomes easier to notice changes in market sentiment.

You do not need to be perfectly synchronized with the Nikkei 225

Of course,

individual stocks do not always move exactly the same way as the Nikkei 225.

Stocks with specific news catalysts.

Stocks with earnings reports.

Thematic stocks.

Small-cap stocks.

These may sometimes move differently from the index.

Therefore,

buying because the Nikkei 225 went up

is not a simple method to follow.

The Nikkei 225 is,

above all,

used as one indicator to gauge the overall market sentiment

as a whole.

7 points I look at when checking the index

I will summarize them at the end.

1. Nikkei 225 futures before the market opens

Check where Japanese stocks are likely to start.

2. Initial movement after the market opens

Will it continue to rise after opening high, or will it be sold off?

3. Direction of the index

Look not only at the change from the previous day, but also at whether it is currently trending upward or downward.

4. Sectors

Which industries are receiving capital?

5. Comparison with individual stocks relative to the previous day

Look for stocks that are stronger or weaker than the index.

6. VWAP and 25MA

Check if the key points for individual stocks align with the movement of the index.

7. Sudden changes in market conditions

If the index changes suddenly, re-evaluate your scenario for individual stocks.

Don’t look at “only individual stocks” for day trading

In my day trading,

I do not trade by looking only at the charts of individual stocks.

First,

check the market conditions.

Next,

look at strong and weak sectors.

And then,

look for strong and weak stocks within those sectors.

In other words,

Index
→
Sector
→
Individual stock

is the order.

For buying,

Strong market sentiment × strong sector × strong stock.

For short selling,

Weak market sentiment × weak sector × weak stock.

Furthermore,

Daily chart.

Change from previous day.

VWAP.

5-minute chart 25MA.

Trading volume.

are combined.

If you only look at individual stocks,

you might wonder,

“Why did it suddenly drop?”

However, if you look at the index,

it turns out the Nikkei 225 had actually collapsed first.

This can happen.

That is why I

place significant importance on

watching the overall market trend

at the same time as individual stocks when day trading.

I host a live day trading stream on YouTube every weekday morning starting at 8:30 AM.

Before the market opens, I check Nikkei 225 futures and my watchlist, and from 9:00 AM onwards, I monitor both the index and individual stocks to decide whether to buy, sell, or do nothing.

If you would like to see how I use market conditions in actual day trading, please feel free to use my morning live stream as a reference.

Related Articles

[Watch the Previous Day’s Comparison for Day Trading] How to Identify Strong and Weak Stocks at the Opening

This article explains how to find stocks that are relatively strong or weak compared to the Nikkei 225 and industry peers.

[Day Trading Entry Timing] Explaining When to Buy and When to Wait

This explains the logic behind entries that combine market conditions with individual stocks.

[How to Buy the Dip in Day Trading] Explaining Points to Target in an Upward Trend

This explains how to look at situations where strong stocks pull back during a strong market environment.

[How to Short Sell in Day Trading] How to Find Weak Stocks and Target Declines

This explains the logic behind searching for weak stocks during a weak market environment.

*This article does not recommend specific stocks or trading methods, nor does it guarantee profits. Please make investment decisions at your own risk.

If you wish to purchase the Day Trading Game, please visit the pinned page.