How To Trade US Stocks From Nigeria & Overseas – Learn How to Open a US Stockbrokerage Account, Pick Profitable Stocks As Non-Resident Citizen Living Abroad.
As a Nigerian who is looking for overseas investment opportunities in a market like the US, it is quite difficult to find an online broker that offers unrestricted access to the financial market. If you doubt, then you can spend some time to research all the regulated stockbrokers in the US, you will notice that one of the countries that are hardly accepted into their client record is Nigeria. While I understand the regulatory reasons for such decline, and the need to ensure sanity in their global financial market, I still feel there are sincere local traders and investors to consider.
Why are foreigners/non-US resident showing increasing interest in US stocks despite the presence of the local stock exchange and online equities trading platforms in their respective countries? The US stock market remains the world’s largest and most liquid stock exchange in the world. Not only does it give you opportunities to trade fast-growing global brands, but also lets you diversify your portfolio into foreign-currency-denominated assets. As an investor, you need to hedge your asset against currency risk by diversifying into foreign assets.
As of this update, the number of publicly listed US stocks representing major sectors is more than 7000, and that of foreign listed stocks in the market keeps increasing as they seek access foreign currency capital for expansion.
For us here in Nigeria, the market is a perfect alternative to trade stocks and diversify equity portfolio away from the Naira, especially now that the NSE index performance has shrunk from a peak of 45,000 points in February 2018 to a multi-year low of 24,000.
As of this writing, the NSE index has just returned to a negative path, posting -15% YTD on the back of higher than expected selling pressure. Besides, after the 2008 equity market crash, it seems retail investors do not have confidence in our local bourse again; most stocks in the banking, consumer, oil and gas, insurance and industrial sector are down from their highest price level; some stocks that traded as high as N100 – N150 are even selling for a paltry N5 to N10.
This bearish trend as pointed out in my post on how to pick stocks in a bearish market is very strong, the dollar against emerging market currencies is gaining momentum as the FED reserve increased US rate from 1.5% to 1.75%. Normal, foreign portfolio investors, who are looking for “carry trade opportunities”; buy currencies with increasing yield and sell currencies with falling yield.
Also, the political landscape isn’t clear again; no thanks to political insecurity. Even after impressive year-end results, fund managers are re-adjusting their portfolio to cushion the effect of political risk.
If you look at the NSE market outlook in near-term, it makes more sense to cut equity exposure as a short-term trader until the market regains its strength and diversify into the foreign stock market.
The best investing strategy for Nigeria investors:
Diversifying into the US stock market offers a perfect hedge against exchange rate risk arising the US dollar strength against the Naira. The US stock market lets you trade various asset classes beyond equities; metals, energy, and indices. Each of these asset classes tracks the performance of virtually all the segments of the US and world economy, for instance as the US dollar index continues to strengthen against emerging market currencies, there is a tradable ETF that tracks that movement, and as the Oil price increases on rising tension in the middle east, there is also an Oil ETF shares to trade, even the overall market indices, S & P, Dow 30 and Nasdaq have their ETFs too. Right now, everyone is talking about AI (artificial intelligence), and fintech, you can also leverage the stock market and tap into the multi-billion dollar opportunities in this emerging technology.
Another catch I love so much about US stocks is that there is no limit to their daily price movement, a stock can rise and fall by more than 100% depending on investors’ sentiment. Take a look at the snapshot of two stocks that gained 143.12% and 105.23% on a single day:
You won’t find such an opportunity in our local bourse as regulatory and allowable changes are capped at +/- 10% daily.
The summary of these is that you need to look beyond the local stock market by giving foreign stock trading a try, but not without having a proper understanding of strategies for picking stocks that will rise.
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I have also added US Equities Market to this blog so you can follow my weekly US stock analysis and trade setups.