Getting Started In The Asian Stock Market

So, you are tired of trading the common US markets and want to branch out into some other options. Well, the Asian stock market is certainly a potential choice for you.

Luckily for us, we don't have to stick to one market or one country. With online trading, us traders have instant access to many markets across the globe. What a beautiful time to be alive.

So lets get started,

 

What is the Asian Stock Market ?

Asian Stock Market Asian Stock Market

The Asian Stock market is essentially a marketplace within Asian countries where traders and investors can invest in stocks, currencies, stock market futures and/or indexes.

Some countries within the Asian stock market network include  :

    1. Japan

 

    1. Taiwan

 

    1. China

 

    1. India

 

  1. Australia (The S&P ASX  All Ordinary Index is considered an Asian Index)

 

Some popular indexes within the Asian stock market include:

  • Shanghai SE Composite Index
  • Nikkei 225
  • Mumbai Sensex
  • Taiwan TSEC 50
  • Hang Sang
  • The S&P ASX All Ordinary Index

 

What Are The Benefits Of The Asian Stock Market ?

Well, if you haven't traded them before, new markets means new opportunities. Like everything in the trading world, there are opportunities and there are pitfalls and negatives.

With billions invested into these markets, liquidity isn't generally an issue compared to some other exchanges through the globe.

Asian Stock Market Hours 

Another benefit depending on where you live is the timezone difference. If, for example, you have a day job in the USA and want to be able to trade, the Japanese markets are still a great place you could choose.

The active hours for the Nikkei for example is between 20:00 & 02:00 est. I know some of you emailed me saying you didn't have the time to trade during the day.

Well, this is potentially a solution for you if you are willing to work hard and if you are home from work before 8pm est you can prepare and trade Asian markets.

 

Liquidity

In the US markets, we are spoiled for choice when it comes to liquid markets to trade. Well, a lot of foreign markets are very illiquid making it tricky to scale size.

Luckily, a lot of these Asian markets are liquid with huge volume traded each day.Just take a look at the volume stats for the Japanese markets. Not bad eh ?

However, always be wary if you are trading futures what contract month it is because the volume can vary massively.

Again, trading American markets, we generally don't have to concern ourselves with these liquidity issues but it can become a nightmare in some foreign markets.

 

Risk Factors

risks of asian markets Risk factors

 

Like any market or investing vehicle out there today, there are risk factors. Some can be high risk investments  and others a lower risk investment.

The same fundamental principles apply to all markets and still get affected by geo political tensions etc. So anyone coming from trading other markets, these risk factors are similar.

However, with Asian markets, one thing worth mentioning is currency risk.  The base currencies are different in Asia with Yen popular in the Japanese markets for example.

Other factors you'll need to know are the different economic announcements can effect markets differently in Asia.

This website has some useful information on all of the news releases and how it effected the markets.

As of the writing of this post, the markets in Asia are super volatile due to the current trade war talks between Trump & China.

A simple tweet by Trump has shown to spike a market one way or the other so keep this in mind.

Just as the chart below is showing, no market is immune to huge losses.

risk factors of the Asian markets Nikkei Weekly Chart

Now imagine if you were an unfortunate trader or investor long during all this mess. Unfortunately, without having a trading plan and not following rules, things can go wrong rather quickly.

 

The Nick Leeson Story

 

Nick Leeson Asian Stock Market Nick Leeson , photo courtesy of nickleeson.com

This leads me onto a very interesting story. Obviously we cannot talk about the Asian markets without mentioning none other than Nick Leeson.

So for those of you who don't know him, Nick Leeson is a rogue trader who is responsible for bankrupting a famous bank. Which one ? Barings Bank !

It was the second oldest merchant bank in the world at the time.

How on earth did he break a bank ? 

He singlehandedly bought tons of contracts in the Nikkei during the bear market and sideways market that followed. (as seen above)

True smart accountancy manipulations, he was able to hide losses in this position. It soon became a very big mess and he was staring at over £860 million in losses.

Realising that he's screwed, he fled Singapore with his then wife.

Think about this, he has managed to hide £860 million + before someone coped on. Having fled the country, Nick still had the position open and when the scale of his errors were finally discovered, the actual loss amounted to over £1billion.

Imagine that for a moment.  £1 billion loss !

 

What happened next ? 

He was eventually caught and sentenced to six years in prison. Yes, you read that right. 6 years. !

The bank went insolvent as a result of this trade and he will be forever known as the 'rogue trader'. Over 1,000 people lost their jobs.

This inspired Hollywood producers to make his story into a film, perfectly titled Rogue Trader.

Upon Nick's release from prison, he moved back to the U.K. before settling down in Ireland. Listen to him speak about his experiences in Singapore jail

Think I'm finished yet on Nick ? Nope.

He has a twitter account where he tweets quite frequently.  And I'll let you be the judge of some of his tweets.

risk factors of the Asian markets Nick Lesson tweets

 

They are just some of the tweets I found on his account. I don't know if I'd feel the same way even 20+ years but hey, countless hours of therapy must have helped.

At least he has a sense of humour about the whole thing !

The movie based on his life featuring Ewan McGregor is a must watch for all the lovers of these corporate crime type of movies. It's an older one so quality is not great. If anyone can get it in better quality, email me as I'd love to have another look.

It really is amazing to think that one man can bring down an entire bank with his trade on Asian stock market futures.

So, now that you can see some of the risk factors, and an interesting story on what can happen if you don't obey risk, lets get on to some opportunities.

What kind of opportunities present themselves ?  Luckily, plenty. The trick is to always manage your risk/ reward.

 

Asian Market Opportunities

If you have read any of my posts or my trading strategy post, you'll know I love to keep things simple. I love chart patterns, it's what works for me. So lets dig into some big opportunities that presented themselves over the years.

First up  The Nikkei back at the end of 2016

nikkei asian stock market Nikkei Weekly chart[/caption]

Back at the end of 2016, the Nikkei formed a beautiful break of the trend (blue line)

This marked the beginning of an uptrend for over a year. If you wanted to switch things up in your investments, this would have been a great option.

Just keep in mind that hindsight is a wonderful thing and spotting this setups in real time can be much harder.

There are lots of Asian Markets to go both long or short. Just this year, the Shanghai Index created an opportunity.

Shanghai Stock market Shanghai stock market Index

Look at that beautiful short setup on the Shanghai index. This is what dreams are made of.

It broke the trendline, came back and tested the level, (support became resistance) and down it went ever since.

This technical setup added with the trade war chatter between America and China made for a nice high probability setup.

Again, this is obviously easier in hindsight but keep it mind, reviewing charts like this is a very good way to learn and improve yourself.

To this day, I do research like this regularly. After a while, it becomes second nature and suddenly you will notice these patterns in real time.

 

How Can I Trade The Asian Stock Market ?

Luckily, most trading brokers offer the option to trade these. If you are unsure if your broker has these offers, simply email their support and ask. They may be able to offer you the different Asian markets.

Just keep in mind if you want to trade the Asian stock market futures especially that volume and liquidity can be issue depending on which contract month you trade.

This might seem basic knowledge to most but for the absolute beginners out there, please be aware of this  when getting started in futures.

Unfortunately, so many forget this major piece of the puzzle when starting.

 

Useful Resources

If you don't want to watch the movie or generally prefer reading, you can get this book (for entertainment purposes) about Nick Leeson and his story.

The Asia Markets neatly displayed on one page can be found on the Wall Street Journal.

If you would like to know what news is out in Asia and how it will affect the asian stock markets, Dailyfx is great. They have lists of news announcements for most countries in the world and you can filter to a country of your choosing quite easily.

 

Conclusion

So there you have it, the Asian stock market and futures all bundled up into one post. Honesty, as shown above it's just like any other market in the world and can be just as hard to trade.

But if you are struggling to find trading or investing setups to make in the USA, look no further than Asian. Those 2 charts above shows the potential opportunities available.

I narrow my focus to the US personally but there is definitely room to expand to these markets.

For those of you living in the US and have a job, these markets might be suited for you as the active hours are much later in the evening. For the rest of us, well, stick to what we know best I guess.

And remember, don't become a Nick Leeson, always manage that risk.

Best of luck in trading and I hope that helped.

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