How to view the Taiwan Index? A complete guide for beginners to get started with Taiwan Index futures trading

The Taiwan Index Futures have always been a hot topic among investors in Taiwan. Combining advantages such as dual-direction trading, leverage amplification, and after-hours trading, they attract a large number of short-term traders. However, for many beginners, questions like “What is the Taiwan Index Near Full?” “How to trade steadily?” and “How to avoid risks?” often leave them confused. Today, let’s take an in-depth look at the most active index futures instrument in the market.

What exactly is the Taiwan Index Futures? Core Concepts at a Glance

Taiwan Index Futures are futures contracts that track the movement of the Taiwan Weighted Index. Simply put, they use the Taiwan stock market’s main index as the underlying asset. When you are bullish on Taiwan’s stock market prospects, buying Taiwan Index Futures can profit; conversely, when bearish, selling Taiwan Index Futures can also generate gains. This is what makes it most attractive to traders—both bulls and bears have the opportunity to make money.

The investment amount behind Taiwan Index Futures is quite substantial. Taking the TAIEX(TX) as an example, if the weighted index is at 15,600 points, the nominal value per contract is 15,600 × 200 = NT$3,120,000. However, traders only need to pay the initial margin, usually around NT$180,000, which is the so-called leverage effect.

Why are traders so fond of Taiwan Index Futures?

Here are a few core attractions:

High leverage multiple — Invest NT$1 as margin to control a contract worth multiple times that amount; profits and losses are amplified simultaneously, which is very attractive to aggressive traders.

Long trading hours — Regular trading hours are from 8:45 AM to 1:45 PM, with after-hours trading from 3:00 PM to 5:00 AM the next day, totaling about 19 hours, far exceeding stock market trading hours.

Very low transaction fees — Compared to stock investments, futures transaction fees as a percentage of the underlying investment can be as low as 0.01%. The existence of leverage makes the cost advantage even more apparent.

Index represents the market — Trading index futures is akin to betting on the overall market trend, avoiding individual stock risks, suitable for traders optimistic about the entire market.

Diversification of investment needs — Using one contract to hedge against the downside risk of an entire stock portfolio is a common tool among institutional and professional traders.

What does “Taiwan Index Near Full” mean? Understanding the Quotation Rules is Key

When trading Taiwan Index Futures, you will see various contract names on the quotation screen, such as “Taiwan Index Near,” “Taiwan Index Near Full,” “Small Taiwan Index Near Full,” etc. What do these names represent?

First, all futures contracts have expiration dates, usually on the third Wednesday of the contract month. The term “Near” indicates the closest expiration month to the present. So, “Taiwan Index Near” refers to the futures contract with the nearest expiration date.

And what about “Full”? It indicates that the quote data includes both trading sessions throughout the day—including the regular trading hours (8:45 AM to 1:45 PM) and the after-hours session (3:00 PM to 5:00 AM the next day). When you search for “Taiwan Index Near Full” or “Small Taiwan Index Near Full,” the quotes you see cover the entire trading activity.

From a liquidity perspective, the contract with the nearest delivery date usually has the highest trading volume. However, as expiration approaches, traders need to perform “rollover”—closing the near-month contract and opening a longer-dated contract. If you want to avoid frequent rollovers, you can choose to trade contracts with more distant delivery months.

Large Taiwan Index vs Small Taiwan Index: Which is More Suitable for You?

Currently, the Taiwan Futures Exchange offers two main Taiwan Index products: the Large Taiwan Index(TX) and the Small Taiwan Index(MTX). The key difference lies in the contract multiplier.

Large Taiwan Index(TX) — 1 point = NT$200. For an index at 15,600 points, one contract is worth approximately NT$3.12 million. The initial margin is about NT$184,000.

Small Taiwan Index(MTX) — 1 point = NT$50. For the same index level of 15,600 points, one contract is worth about NT$780,000. The initial margin is approximately NT$46,000. In simple terms, the Small Taiwan Index is one-quarter of the Large Taiwan Index.

From a leverage perspective, the Small Taiwan Index offers a higher leverage ratio (about 17 times), meaning it has larger price swings; the Large Taiwan Index is relatively more stable. Beginners often start with the Small Taiwan Index because the lower margin requirement makes it psychologically easier to handle.

Both products have identical trading hours, price movement limits, and settlement methods—they are cash-settled. When the index expires, all open contracts are automatically settled based on the index average price during the last 30 minutes before expiration.

Preparing for Trading: Opening an Account and Margin

To start trading Taiwan Index Futures, you first need to open an account with a futures broker. Most brokers now support online account opening, which is quite straightforward. The only requirement is that you are at least 20 years old.

After opening an account, deposit the appropriate initial margin based on the contract size you wish to trade. Here’s a key point: Margin is collateral you put up, not the actual investment amount. For example, putting NT$46,000 as margin to buy 1 Small Taiwan Index contract controls an underlying nominal value of about NT$780,000.

Once trading begins, the system monitors your account in real-time, calculating unrealized gains or losses based on market movements. If your account equity falls below the maintenance margin requirement (about NT$35,300 for Small Taiwan Index), the broker will require you to deposit additional funds. If you fail to do so promptly, the system will automatically close your position—commonly called a “margin call” or “forced liquidation”—which traders must avoid.

How to Calculate Taiwan Index Futures Profit and Loss? Example Calculation

Suppose you invest NT$400,000 as margin to buy 2 Large Taiwan Index(TX) contracts at an entry point of 15,600.

If the index rises 400 points to 16,000 — profit per contract = 400 points × NT$200 = NT$80,000. For 2 contracts, total profit = NT$160,000. Your account increases from NT$400,000 to NT$560,000.

If the index drops 400 points to 15,200 — loss per contract = 400 points × NT$200 = NT$80,000. For 2 contracts, total loss = NT$160,000. Your account drops from NT$400,000 to NT$240,000, approaching the maintenance margin level.

From this example, a 400-point move (about 2.56%) results in a 40% fluctuation of your account. This illustrates the double-edged sword of leverage—profits can accumulate rapidly, but losses can also quickly erode your principal.

Trading Strategies: Short-term Focus, Technical Analysis is Key

Taiwan Index Futures are generally not suitable for long-term holding because they require regular rollover. Most traders operate in short-term, which influences the choice of analysis methods—technical analysis is preferred over fundamental analysis.

Moving Averages System

The most common are the 50-day simple moving average(SMA), 200-day SMA, and 20-day exponential moving average(EMA). The basic logic is:

• Index above major moving averages → Uptrend, bullish signal
• 50-day SMA crossing above 200-day SMA → Golden cross, buy signal
• 50-day SMA crossing below 200-day SMA → Death cross, sell signal
• Moving averages sloping downward → Downtrend, bearish signal

Momentum Indicators

Relative Strength Index(RSI) — mainly used to identify divergence. When the index makes a new low but RSI does not, it’s called “bullish divergence,” often indicating a rebound.

MACD Indicator — composed of MACD line, signal line, and histogram. When MACD crosses above the signal line, it’s a buy signal; crossing below is a sell signal. When MACD enters positive territory, it signals bullish momentum; negative territory indicates bearish momentum.

Chart Pattern Recognition

Common patterns include head and shoulders, double top(bottom), ascending(descending) triangles, wedge patterns, etc. For example, an ascending wedge is typically a bearish pattern, but traders often wait for a price break below the lower trendline to execute a sell. If instead the price breaks above the upper trendline, the pattern is invalidated.

Risk Management: The Lifeline of Trading

Why are Taiwan Index Futures particularly risky? Two main reasons:

First, leverage amplification — 17 times or higher leverage means losses are magnified 17 times; small market movements can cause huge unrealized losses.

Second, unlimited loss potential — Unlike stocks, which can only fall to zero, shorting futures has theoretically unlimited losses. The index can suddenly surge due to black swan events, leaving short sellers unable to bear the losses.

Therefore, risk management must be planned before trading, not improvised during trading.

Core Principles of Risk Management

First, accurately calculate your actual investment amount — Don’t just look at the margin amount. When you put NT$46,000 as margin to buy 1 Small Taiwan Index contract, it represents an underlying contract value of about NT$780,000. You should assess your risk tolerance based on this NT$780,000, not just the NT$46,000.

Second, set pre-determined stop-loss points — Decide your entry point and stop-loss level simultaneously. Once the index hits your stop-loss price, close the position immediately to limit losses within an acceptable range. Many broker platforms support stop-loss orders for automatic execution.

Third, use options for hedging — Buying put options when purchasing Taiwan Index Futures acts as insurance. Selling call options when shorting the index provides similar protection. The Taiwan Futures Exchange’s Taiwan Index options code is TXO, with a multiplier of NT$50, matching the Small Taiwan Index. To hedge one Large Taiwan Index contract, you need four options contracts.

Frequently Asked Questions

Q: When the contract is close to expiration, what is the easiest way to rollover?

A: Use a “spread order”(Spread Order). Select the spread order type on the trading platform, input a close order for the near-month contract(close) and an open order for the longer-dated contract(open) simultaneously. The system will execute both trades at once. The spread order input is based on the point difference between the two contracts, not an absolute price.

Q: Why are Taiwan Index Futures prices often different from the spot index?

A: Mainly due to dividend payments and interest rate levels. If major constituent stocks pay dividends during the period, the futures price is usually slightly lower than the spot index. As expiration approaches, the two prices converge and are equal on the delivery date.

Q: Can I set orders valid for more than one day?

A: Yes, but it depends on whether the platform supports “Good-Til-Canceled” (GTC) orders. These orders remain valid for months or until filled.

Q: Can I close a daytime-opened contract during after-hours trading?

A: Absolutely. Although the quote names differ between regular and after-hours sessions, the underlying contracts are the same. Choosing “Taiwan Index Near Full” or “Small Taiwan Index Near Full” allows you to close positions opened at any time.

Final Recommendations

Due to high leverage, liquidity, and long trading hours, Taiwan Index Futures are a paradise for short-term speculators but also a concentrated risk zone. The key to surviving in this market is not the win rate per trade but survival ability and disciplined capital management.

Make a trading plan before trading, execute it strictly during trading, and review and summarize afterward. Only by doing so can you profit from the turbulent waves of Taiwan Index Futures.