Trading Foreign Stocks

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Trading ForeignTrading Foreign
StocksStocks

What is the point of trading foreign stocksWhat is the point of trading foreign stocks
when there are plenty of US stocks towhen there are plenty of US stocks to
trade on the NYSE or NASDAQ?trade on the NYSE or NASDAQ?

Trading foreign stocks in Asia can putTrading foreign stocks in Asia can put
traders where the growth is.traders where the growth is.

Before We Continue…Before We Continue…
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Trading foreign stocks in Europe can putTrading foreign stocks in Europe can put
traders in situations of high markettraders in situations of high market
volatility and potential profits as thevolatility and potential profits as the
European debt crisis threatens a wave ofEuropean debt crisis threatens a wave of
sovereign debt defaults and a plummetingsovereign debt defaults and a plummeting
Euro.Euro.

Sorting out who the winners will be and whoSorting out who the winners will be and who
will be the losers in trading foreign stocks,will be the losers in trading foreign stocks,
as usual, will take both fundamental andas usual, will take both fundamental and
technical analysis of individual stocks andtechnical analysis of individual stocks and
broader market trends.broader market trends.

Trading foreign stocks does not requireTrading foreign stocks does not require
trading on a foreign stock exchange.trading on a foreign stock exchange.

Many foreign stocks trade in the USA asMany foreign stocks trade in the USA as
American Depository Receipts.American Depository Receipts.

Level II and III ADR’s require supervision byLevel II and III ADR’s require supervision by
the SEC and, thus, have similar reportingthe SEC and, thus, have similar reporting
requirement to US companies.requirement to US companies.

Thus, a trader will have solid numbers onThus, a trader will have solid numbers on
which to base his estimate of the stock’swhich to base his estimate of the stock’s
margin of safety and intrinsic stock value.margin of safety and intrinsic stock value.

Trading on the NYSE or NASDAQ theseTrading on the NYSE or NASDAQ these
stocks can be profitably followed withstocks can be profitably followed with
technical analysis tools such astechnical analysis tools such as
Candlestick stock charts.Candlestick stock charts.

Trading foreign stocks, like all stock trading,Trading foreign stocks, like all stock trading,
profits those who learn a stock’sprofits those who learn a stock’s
fundamentals and closely follow stockfundamentals and closely follow stock
price patterns with Candlestick analysis.price patterns with Candlestick analysis.

The Eurozone’s economy is equal to orThe Eurozone’s economy is equal to or
slightly larger than that of the USA.slightly larger than that of the USA.

China’s is still substantially smaller than thatChina’s is still substantially smaller than that
of the USA or the EU but is growing atof the USA or the EU but is growing at
nearly ten percent a year.nearly ten percent a year.

Both economies have many large companyBoth economies have many large company
stocks that trade in the USA as ADR’s.stocks that trade in the USA as ADR’s.

To trade these stocks a trader willTo trade these stocks a trader will
commonly develop a trading strategy.commonly develop a trading strategy.

For example, a potentially viable strategy inFor example, a potentially viable strategy in
China might be to simply look for growthChina might be to simply look for growth
stocks.stocks.

In Europe, on the other hand, a trader mayIn Europe, on the other hand, a trader may
choose to look for stock volatility or stockschoose to look for stock volatility or stocks
that gradually become cheaper as thethat gradually become cheaper as the
Euro falls.Euro falls.

If companies in Europe, such as Siemens,If companies in Europe, such as Siemens,
have substantial sales outside of the Eurohave substantial sales outside of the Euro
Zone they may continue to have a strongZone they may continue to have a strong
balance sheet even if the Euro falls.balance sheet even if the Euro falls.

Thus a trader could look for a stock in theThus a trader could look for a stock in the
Euro Zone with a high price to earningsEuro Zone with a high price to earnings
ratio.ratio.

He could follow via Candlestick patterns asHe could follow via Candlestick patterns as
well as quarterly reports and news aboutwell as quarterly reports and news about
the Euro.the Euro.

In the periods of market inefficiency thatIn the periods of market inefficiency that
follow changes in fundamentals, such as afollow changes in fundamentals, such as a
debt default in Greece or Italy, he coulddebt default in Greece or Italy, he could
profitably buy stock, sell stock, sell short,profitably buy stock, sell stock, sell short,
or profit from buying options asor profit from buying options as
Candlestick signals indicate.Candlestick signals indicate.

Getting accurate and up to date stockGetting accurate and up to date stock
information is often a problem wheninformation is often a problem when
trading foreign stocks on a foreign stocktrading foreign stocks on a foreign stock
exchange.exchange.

Here is where American DepositoryHere is where American Depository
Receipts are useful.Receipts are useful.

The level II and III ADR’s are regulated byThe level II and III ADR’s are regulated by
the Securities and Exchange Commissionthe Securities and Exchange Commission
and must provide periodic and accurateand must provide periodic and accurate
reports of their financial condition andreports of their financial condition and
plans.plans.

Because these foreign stocks trade as USBecause these foreign stocks trade as US
stocks do on the NYSE or NASDAQ theystocks do on the NYSE or NASDAQ they
readily tradable during US business hours.readily tradable during US business hours.

Using Candlestick pattern formations andUsing Candlestick pattern formations and
Candlestick trading tactics a US trader canCandlestick trading tactics a US trader can
trade European or Asian stocks and taketrade European or Asian stocks and take
advantage of the growth and volatility thatadvantage of the growth and volatility that
often leads to trading profits.often leads to trading profits.

Trading Foreign Stocks

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