Forex Trading Reviewer

Bonds are one of the main stream types of investment along with stocks and real estate, and if you want to learn how to trade bonds make sure that you get a good education in the subject 1st. There are a number of important points that you must understand about bonds before you start investing in them. Not fully understanding these things may cause you to purchase the wrong bonds, at the wrong maturity date.

Like all investments it is important to learn about what you are investing in, and certainly don’t just take the advice given to you by a bond seller without checking it out 1st yourself. The three most important things that must be considered when purchasing a bond include the par value, the maturity date, and the coupon rate.

The par value of a bond refers to the amount of cash you will receive when the bond reaches its maturity date. In other words, you will receive your initial investment cash back when the bond reaches maturity.

The maturity date is the date that the bond will reach its full value. On this date, you will receive your initial investment, plus the interest that your money has earned.

Corporate and State and Local Government bonds can be ‘called’ before they reach their maturity, at which time the corporation or issuing Government will return your initial investment, along with the interest that it has earned thus far. Federal bonds can not be “called”.

The coupon rate is the interest rate that you will receive when the bond reaches maturity. This number is written as a %, and you must use other information to find out what the interest will be. A bond that has a par value of say $2000, with a coupon rate of 5% would earn $100 per year until it reaches maturity.

Because bonds are not issued by banks, many people don’t understand how to go about buying one. There are two ways this can be done.

You can use a broker or brokerage firm to buy them for you or you can go directly to the Government. If you use a broker, you will more than likely be charged a commission fee. If you want to use a broker, you should shop around for the lowest commissions!

Purchasing directly through the Government isn’t nearly as hard as it once was. There is a program called Treasury Direct which will allow you to purchase bonds and all of your bonds will be held in one account, that you will have easy access to. This will allow you to avoid using a broker or brokerage firm.

More advanced traders may try to buy and sell bonds to take advantage of the price movements, you can even swing trade them. But this is a very risky business if you don’t know what you are doing, you will need to take a swing trading course if this was something that wanted to, but again most people just buy and hold.

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If you are new to the markets, it is imperative that you work hard to educate yourself before risking any money.  Most people are attracted to the markets because they hear of person X making 50% this year, person Y doubled their money on a trade and on and on.  People are not apt to share in the major disasters they have had, and often exaggerate the profits and underestimate the losses when speaking about what they have done.  It is very common to not want to relive a painful moment when speaking to others about your investment decisions.  So before you decide to take the plunge, you will have to figure out what exactly it is that you are tying to accomplish

There are two 3 types of trading that can be done:  short term (minutes to days), swing trade (days to weeks) and long term investing (weeks to years).  Simply discovering which type of trading suits you might seem like an easy task, but it is most likely the most important decision you will make.  To make the most of it, you will need to match up the trading style with your level of risk and type of personality you have

Short term trading is also synonymous with day trading, although positions can be held overnight and still be considered a day trade for the most part.  This is probably the riskiest type of trading for most people and requires the most amount of time.  If you have a full time job when the markets are open, this is probably not for you, or only in small batches.   While some people do day trading manually, others prefer the help of a day trading robot to automate things.

Swing trading is much more manageable than trying to learn day trading for most people, but still requires constant monitoring during the day.  With swing trading the amount of time and concentration required is far less than with day trading, but it will still require you to monitor your positions each evening, and if something is close to a price target or stop area, monitor during the day as well.  Swing trading tries to capture a bigger move in a stock, such as a 5% or 10% or more move in a single direction with limited risk.  Since swing trading entails holding for bigger gains and for longer periods of time, the actual trading activity of buys and sells is far less than with day trading.  Anyone looking to swing trade should keep in mind that its far less risky than day trading, but still entails betting on the short term direction in the price of a stock.

Long term investing is what most people are familiar with – buy and hold.  The main thing that has diffentiated over the last ten or so years is the economic climate, which makes it a riskier proposition to just buy something and forget about it.  Many investors have learned a hard lesson when they watched a significant gain turn into a big loss because they just held on.  Every investor these days needs a fixed plan to exit a position rather than hold and hope.

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