Taking a Closer Look at Bonds
In the following guide, we cover the basics of bonds trading online as well as discuss what to look for when choosing a bond trading platform.
You might already be familiar with what bonds are – they are probably offered in some shape or form by your local bank. However, bond trading platforms have opened up other ways in which you can profit on the change in value of a bond, without having to commit to what is usually quite a high entry price. But before we jump into the finer points of bond trading platforms, let’s take a closer look at what bonds are and what they are not.
What are Bonds?
In a way, bonds can be likened to a kind of I.O.U. A bond is a financial instrument that comes with a set return and, traditionally, a specific time commitment. Bonds are issued by governments and corporations as a way to raise money. In exchange for buying into a bond – effectively ‘lending’ the issuer money – the bond holder gets their payment back with a pre-agreed interest added.
Sometimes referred to as fixed-income securities, bonds can be publicly traded, traded over-the-counter or arranged privately between the borrower and lender. There are generally four types of bonds available: corporate bonds, municipal bonds, government bonds and agency bonds.
As mentioned above, there are now several ways you can engage in Bonds trading online, so let’s take a look at some of the most popular options.
Investing in Bonds
Bonds have long been held as one of the safest forms of investment – especially for those unfamiliar with other financial assets. However, it’s important to note that there are more than one way of investing in or trading bonds.
Typically, investing in bonds will offer a lower rate of return than, say stocks or commodities, as they are relatively low risk – after all, it’s unlikely that a government is going to fail to pay back a bond it has issued.
Bonds vary on their duration, but typically you can expect to be locked into an agreement for 2, 5 or 10 years with some or all of the interest being forfeited if you exit the agreement before the maturation date.
Bonds trading online
A bond’s price actually fluctuates on a daily basis, just like that of any other publicly-traded security. Despite the ‘fixed’ nature of bonds, supply and demand ultimately dictates price. But there is a logic to how bonds are valued. Naturally, this price fluctuation opens up opportunities for traders.
Bonds trading actually involves financial derivatives – the most convenient way being through ETFs. The advantage with the form of bond trading online is that the trader avoids having to buy into the bond for a specified amount of years, or meeting what can be very high minimum purchase costs. As such, bond trading online opens up bonds to traders and investors of all levels.
Many broker websites will offer access to the bonds market and buying and selling often works in the same way as ETF or CFD trading online.
Bond betting is one of the most accessible ways of profiting from the interest movements on government and corporate bonds. As with any other forms of trading or spread betting, however, a little knowledge goes a long way and its important to familiarise yourself with the basics before looking to get started with bond betting.
As we have noted above with regards to trading bonds, bond betting is usually done exhange-traded futures contracts. As the name suggests, bond betting effectively involves speculation on futures prices for bonds such as the long-dated US Treasury bond, the 10-year British gilt-edged stock, the 10-year Japanese JGB and the 10-year German bund.
Most bond trading online is actually a form of bond betting. Spread betting on government or corporate bonds means you are betting on the financial health of the country or firm issuing those bonds. This means you need to account for various market factors, including economic forecasts, trade agreements and licensing deals.
Finding a Bonds Trading Platform in the UK
If bond betting online sounds like something you’d like to get involved in, then you’ll need to find a platform that offers the service. More often than not, you’ll find online brokers offer access to multiple markets, so Forex trading platforms might also offer crypto, bond, stocks and gold trading online, for example.
There are numerous bonds trading platforms out there and it’s worth taking the time to find the right one for you. First off, ask yourself what markets will you be looking to trade in? Will it be exclusively bond betting or would you prefer access to a crypto trading platform as well? What type of trader are you? Are you looking for an easy-to-use interface, or a vast array or pro-level tools?
Answering the above questions will help you to figure out what you need from a platform. From there, you can check out our in-depth reviews of the market’s top brokers and exchanges, to find out which one matches your requirements.
How We Test the Best Bonds Trading Websites
To make sure our reviews give you a clear impression of bond trading platforms and what they have to offer, the team of experts here at TradersBest.com subject each one to an in-depth assessment, looking out for key features in the following areas:
Usability, Look and Feel
If you want to start bond trading online, then of course you’ll want a platform that can provide access to the right markets, but it’s also important to find a broker that you find agreeable to use. As such, we review each platform’s overall usability as well as the look and feel of the website.
Very few people spend their entire trading careers without encountering the odd technical difficulty, so it’s always good to know help is at hand, if you need it. We take a look at what a platform’s customer service provision is like, including available contact channels and opening hours.
Fees and Charges
All bond trading platforms will charge a fee of some kind. However, the amount you pay and the way in which they are applied can vary from broker to broker. In addition to trading fees, some bond trading platforms may also have other charges, such as inactivity or withdrawal fees.
To get involved in bond betting, you’ll need to have funds in your trading account. There are more and more payment options these days so whilst you might be perfectly happy to use VISA/Mastercard, it’s always nice to know what other methods are supported. As part of our reviews, we look at the supported methods, as well as processing times and associated fees.
If you are looking to do more than bond trading online, then you will probably be looking for a trading platform that offers access to other markets. When we carry out our reviews, we check out what each one has to offer in terms of markets – both in terms of the assets you can trade in and the international markets you’ll have access to.
Licensing and Regulation
Any asset or financial trading platform – whether it be bond betting or otherwise – must adhere to the strict regulations of the Financial Conduct Authority. A standard part of every review we carry out involves a thorough investigation of a platform’s licensing and regulatory credentials – giving you complete peace of mind that everything they do is above board.
Tips & Tricks For Beginners
There’s no getting away from it, bond betting and bond trading online involve a certain degree of risk. Whilst this is true of any form of investment, many novice traders assume that the low-risk of traditional bond investment applies to trading – and it doesn’t. Bond trading online is akin to Forex trading or CFD trading in this sense.
Nonetheless, bond betting is another avenue to explore for those looking to diversify their trading activities. By setting out with a solid plan, adhering to a few simple rules and making sure you don’t get carried away, you stand every chance of success. With this in mind, what follows are some helpful tips for beginners.
Research Bond Trading Platforms
If you’re serious about bond trading online, then choosing the ring trading platform is an important decision and one that you should invest the time in making carefully. Each platform might offer similar core services, but bond betting is not something that brokers offer as standard – so choose wisely.
By checking out our broker reviews, you’ll not only be able to find which markets a platform offers access to, but also get an idea of how easy it is to use, what sort of support is available and how the fees compare to other operators on the market.
Of course, you don’t have to commit to a single platform and many of the top bond trading platforms will allow you to try their services with a demo account. However, building a solid shortlist of suitable platforms will save you time in the long run.
Don’t Get Carried Away
Traders that succeed do so because they are disciplined and able to stick to a plan. When you start bond trading online, it might be tempting to take bigger risks to try and cash in on higher returns – but this is a surefire way to lose money.
Even if your first forays into bond betting are successful, don’t get carried away. Trading and betting have one thing in common – they are both about playing the numbers. No trader or gambler wins all the time, but the trick is to make sure you end up in the plus on aggregate. Big wins early on are great, but you should look at them as ways to mitigate losses further down the line.
To be successful in bond trading online, you need to keep your eyes on the bigger picture!
Build your strategy
Strategy is crucial in any form of trading. You need to have a plan and be able to stick to it. At the very least, this should involve setting out a budget, a trading schedule and keeping a diary of your trades – the latter can usually be done via bond trading platforms. This may seem a little basic at first, but it is essential to build good habits from the outset.
Once you are up and running, then you can start looking at some of the established strategies used by professionals and top-level traders. These might include trend trading, scalping and fading. However, never try to use a strategy unless you understand exactly what’s involved. More information can be found on our guide to trading strategies.
Stick With What You Know
As we touched upon above, keeping track of the bonds market involves looking at several information streams. With the best of intentions, this can get beyond some people – especially if you are bond trading online as a part-time enterprise.
The trick here is to concentrate on a small area until you develop a level of expertise. For example, you might stick with bonds issued on western European markets, or perhaps even just trade against the spread of a handful of bonds in particular. The important thing is that Rome wasn’t built in a day – after all, you want your trading empire to be built on solid foundations.
Bonds Trading Online – Conclusion
Bonds are probably one of the lesser-known financial instruments when it comes to volume trading or spread betting, but for those that invest the time in understanding the market, it can prove lucrative to include them as part of a trading strategy.
With numerous bond trading platforms on the market, it’s never been easier to get involved and by checking out our range of extensive reviews, you’ll be able to find a broker that matches your own personal trading requirements. Our comparison will also show you how platforms measure up against each other, so you can get a clear idea of who the market leaders are.
As long as you heed our advice and approach bond betting with a strategy in place, there’s no reason why it can’t prove a profitable venture.
Bonds Trading FAQ
♟️ Where can I trade bonds online?
Many people associate bonds with long term investment through a traditional institution, like a bank or building society. However, innovation in the fintech sector means you can now trade bonds on exchanges, just as you might when Forex or crypto trading. To find a reputable broker, feel free to check out our comprehensive reviews – which also contain details on how you can get started trading bonds.
🤔 Do I need a lot of money to trade bonds?
If you invest in bonds in a traditional sense, you’ll probably find that entry costs are quite high. Trading bonds via derivatives, however, is another matter entirely. Whilst different trading platforms will have different fees and commissions, trading is much more accessible to those who don’t want to commit large sums for several years. If you’d like to find out more, then our broker reviews always include a look at the costs and fees involved.
Do I need to buy bonds through a bank?
Contrary to popular belief, bonds have always been available through a multitude of channels – including direct from the issuer. However, things have changed in recent years and the bonds markets are now more accessible than ever before. If you’d like to find out more about trading bonds online, feel free to check out our handy guide on the subject.
🤓 How do I choose a bond trading broker?
Choosing a good broker is always about personal preference. Of course you need it to serve a purpose, but it should also be intuitive and agreeable to use. Our broker reviews always look at the usability and feel of a platform, so you can get an idea of whether or not it will suit your personal tastes.
❓ Can anyone trade Bonds?
Trading bonds online is not quite as popular as CFD or Forex trading online, but that is slowly changing as more and more traders look to diversify their trading strategies. There are a few prerequisites of course – not least a thorough understanding of what bonds are and what trading them involves. Fortunately, we are here to help and our guide on bond trading online will tell you everything you need to know.