http://profitabletradingtips.com/profitable-trading-tips/how-can-i-buy-foreign-stocks
How Can I Buy Foreign Stocks?
A couple of years ago Chinese stocks were outperforming all others. And starting a year ago Chinese stocks started a long and painful crash. If you had been trading Chinese stocks there would have been great opportunities for profit both on the run up in prices and in the decline. So you ask, how can I buy foreign stocks? Do I have to know the language? How about exchange rates? Do I need to first purchase a foreign currency in order to buy foreign stocks? The answer is that you can buy foreign stocks as American Depositary Shares or Receipts (ADRs). These are traded on American stock exchanges so you can trade them just like any other stock in your portfolio.
American Depository Receipts
investopedia defines American Depository Receipt.
an american depositary receipt (adr) is a negotiable certificate issued by a u.s. bank representing a specified number of shares (or one share) in a foreign stock that is traded on a u.s. exchange. adrs are denominated in u.s. dollars, with the underlying security held by a u.s. financial institution overseas. adrs help to reduce administration and duty costs that would otherwise be levied on each transaction.
this is an excellent way to buy shares in a foreign company while realizing any dividends and capital gains in u.s. dollars. however, adrs do not eliminate the currency and economic risks for the underlying shares in another country. for example, dividend payments in euros would be converted to u.s. dollars, net of conversion expenses and foreign taxes and in accordance with the deposit agreement. adrs are listed on the nyse, amex or nasdaq as well as otc.
In short ADRs make it much easier to buy and sell foreign stocks but what you have is still a foreign stock prone to the benefits or risks of a foreign market and currency. You can buy and hold ADRs or you can day trade them or swing trade them. What are the sources of profit?
