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Bonds

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Get Familiar With the Terms and Strategies for Wise Trading

Bonds

A bond is a fixed-income instrument and investment product where individuals lend money to a government or company at a certain interest rate for an amount of time. The entity repays individuals with interest in addition to the original face value of the bond.

Bonds are used by companies, municipalities, states, and sovereign governments to finance projects and operations. Owners of bonds are debtholders, or creditors, of the issuer.

Bonds CFDs

A bond CFD (Contract for Difference) is a financial instrument that lets traders speculate on the price movements of bonds without actually owning the bonds. With a bond CFD, the trader and broker agree to exchange the difference in the bond’s price between the time the CFD position is opened and closed.

While traditional bonds are fixed-income instruments where investors lend money to an issuer and receive regular interest payments, bond CFDs don’t involve this direct lending or ownership. Instead, traders are only speculating on the bond’s price changes.

Bond CFDs allow traders to profit from both upward and downward price movements. If a trader expects the bond price to rise, they go long (buy). If they expect it to fall, they go short (sell).

How to Earn

Earning with bonds is straightforward. When you invest in a bond, you are essentially lending money to a government or corporation for a set period. In return, they pay you interest, usually every six months, until the bond matures. At maturity, you receive your initial investment back. This steady stream of interest payments is known as the bond's yield, and it can provide a reliable income source.

If you purchase a bond below its face value (the amount returned at maturity), you can also make a profit by selling it at a higher price before it matures. Bonds are generally seen as safer investments than stocks, making them a popular choice for those seeking income and stability.

With Bond CFDs, you can earn by speculating on the bond’s price movements without owning the actual bond. Bond CFDs allow you to go long (buy) if you believe the price will rise or short (sell) if you expect it to fall, offering flexibility to profit in different market conditions. Additionally, because Bond CFDs often offer leverage, you can control a larger position with a smaller initial investment—though managing risk is crucial to protect your earnings.

Terms to Know

Bond Issuer - Government entity or corporation that issues the bond. Face value or Par Value - The value of the bond at maturity and the reference amount the bond issuer uses when calculating interest payments.

Coupon Rate - The rate of interest the bond issuer will pay on the face value of the bond, expressed as a percentage.

Coupon Dates - The dates on which the bond issuer will make interest payments.

Maturity Date - The date on which the bond will mature and the bond issuer will pay the bondholder the face value of the bond.

Issue Price - The price at which the bond issuer originally sells the bonds. In many cases, bonds are issued at par.

Yield-to-Maturity (YTM) - The YTM is the total return anticipated on a bond if the bond is held until the end of its lifetime. Yield to maturity is considered a long-term bond yield but is expressed as an annual rate.

Something nobody tells anybody……

Cryptocurrencies are highly volatile, much more so than traditional assets like forex or commodities. This volatility provides short-term traders with greater opportunities for profit. However, it also means there’s a higher risk of significant losses. Traders who are confident in predicting price movements often see this volatility as a chance to profit. Keep in mind to avoid common mistakes such as:

  • Making decisions based on emotions

  • Inadequate research

  • Lack of a solid trading plan

  • Poor risk management

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  • Tested Strategies

  • Tools to Use

  • 1

    HODL

    HODL is a crypto trading strategy where investors buy and hold onto their cryptocurrencies for the long term, regardless of short-term market fluctuations. It's based on the belief that the value of cryptocurrencies will increase over time, so investors resist the urge to sell during market downturns. The term "HODL" originated from a misspelling of "hold" in a Bitcoin forum post and has since become a popular meme in the crypto community.

  • 2

    Scalping

    Scalping is a crypto trading strategy where traders aim to make small profits by executing many trades in a short period. They capitalize on small price fluctuations and typically hold positions for a very brief time, sometimes just seconds or minutes. The goal is to accumulate numerous small gains that add up to a larger profit over time.

  • 3

    Arbitrage

    Arbitrage involves taking advantage of price differences for the same cryptocurrency across different exchanges. Traders buy the cryptocurrency on one exchange where the price is lower and sell it on another exchange where the price is higher, making a profit from the difference. This strategy requires quick execution and low transaction fees to be effective.

  • 4

    Day trading

    Day trading is a strategy where traders buy and sell cryptocurrencies within the same trading day. The goal is to take advantage of short-term price fluctuations to make quick profits. Traders closely monitor price charts and use technical analysis tools to identify patterns and trends. They often employ leverage to amplify their gains (or losses) on small price movements. Day traders typically don't hold positions overnight, as they aim to capitalize on intraday price movements. This strategy requires constant monitoring of the market and disciplined risk management to mitigate losses.

  • 5

    HFT Trading

    High-Frequency Trading (HFT) in Crypto involves using algorithms to execute trades at lightning-fast speeds, taking advantage of small price differences across different exchanges. These strategies rely on computers to analyze market data and execute trades in milliseconds, aiming to profit from short-term fluctuations in cryptocurrency prices. HFT traders often use advanced technology and co-location services to minimize latency and gain a competitive edge in the market.

  • 6

    Range Trading

    Range Trading is a crypto trading strategy where traders aim to profit from the price oscillations of a cryptocurrency within a defined range. In simple terms, it involves buying at the bottom of a price range and selling at the top. Traders identify support and resistance levels to determine the range within which the cryptocurrency's price is expected to fluctuate. They then buy when the price reaches the lower boundary of the range and sell when it approaches the upper boundary. This strategy works best in markets with low volatility, where prices tend to bounce between specific levels without significant breakthroughs.

  • 7

    Trend trading

    Rend Trading in crypto involves following the direction of price movements over time. Traders look for patterns where prices consistently move in one direction, either up or down. They buy when the price is rising (uptrend) and sell when it's falling (downtrend). The idea is to ride the trend for profit, capitalizing on momentum. Traders use technical analysis tools like moving averages and trend lines to identify and confirm trends. The goal is to enter positions early in a trend and exit before it reverses. It's a strategy based on the principle that trends tend to persist, allowing traders to profit from the direction of the market. More about trend trading here.

  • 8

    Long straddle

    A "Long Straddle" in crypto trading involves buying both a call option and a put option with the same strike price and expiration date. This strategy is used when you expect a significant price movement in the cryptocurrency but you're not sure which direction it will move. By having both a call and a put option, you profit from whichever direction the price moves, as long as it moves enough to cover the cost of buying both options.

  • 1

    Portfolio Trackers

    Portfolio trackers like Blockfolio or Delta allow you to monitor your cryptocurrency investments in real-time. They provide detailed analytics, performance tracking, and alerts for price changes, helping you manage and assess your portfolio efficiently.

  • 2

    Charting Tools

    Tools like TradingView offer advanced charting capabilities, allowing traders to analyze market trends, set up indicators, and develop technical trading strategies. These tools are essential for visualizing price movements and making informed decisions.

  • 3

    Price Alerts

    Setting up price alerts using tools like CoinMarketCap or CryptoCompare allows you to receive notifications when a cryptocurrency reaches a specific price point. This helps you stay updated on market movements without needing to monitor prices constantly.

  • 4

    Crypto News Aggregators

    Staying informed is crucial in the fast-moving world of crypto. News aggregators like CoinDesk or CryptoPanic compile the latest news, market analysis, and updates from various sources, helping you stay on top of market developments.

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