asia trading strategy

Asian Trading Strategies – How To Trade Asian Markets – Rules, Backtest, Returns

With the world getting increasingly connected online, it is now easier to diversify your investment portfolio into other economies. Asia is home to tens of thousands of investment opportunities; you can choose to invest in anything from safe large-cap stocks in Singapore to high-growth frontier market stocks in Vietnam. But what are Asian trading strategies?

There are different ways to invest in the Asian financial markets. You can invest in exchange-traded funds (ETFs) or directly trade the stocks via international brokers like Interactive Brokers. You can also invest through American Depository Receipts, which trade on the OTC markets and can easily be bought via your broker.

In this post, we take a look at Asian trading strategies, and at the end of the article, we provide you with some backtests.

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How can you trade Asian markets?

Here are the four common ways you can trade the Asian markets:

  1. Exchange-traded funds (ETFs): The easiest way to invest in the Asian market is to buy ETFs that track the various markets in Asia, and there are many Asian index ETFs you can invest in. Investing in such index funds offers the advantages of broad diversification at a lower cost than you might otherwise be able to achieve by attempting to build the positions directly.
  2. Depository Receipts: You can buy their depository receipts of Asian stocks in your country of residence. A depositary receipt (DR) is a certificate issued by a bank that represents shares in a foreign company that is traded on a domestic stock exchange. It allows you to hold equity in foreign countries and provides an alternative to trading on an international market. The American depositary receipts (ADRs) trade on the OTC market and can be bought via your broker.
  3. Directly trading the stocks: While purchasing stocks on foreign exchanges is more difficult than purchasing ADRs, there are online brokerages that allow you to buy and sell securities directly on select international markets. One broker that offers access to most stock exchanges around the world is Interactive Brokers. If you are not a client of the broker, you should inquire with your broker about direct access to Asian stocks. That said, investing in single stocks is risky. Most stocks end up practically worthless and you need to know what you are doing.
  4. Asian stock CFDs: While this is not often recommended, you can trade Asian stock CFDs via a CFD broker, such as IG, eToro, and so on. If your interest is just to gain from price movements rather than owning the underlying stocks, this might be a good option. It is best used for short-term trading and speculation, not investing, as it does not offer you the ability to own the asset. We don’t recommend trading or investing in CFDs. We prefer t