Bond Market Vs. Forex


When we talk about trading, we are already talking about very frequent transactions, such as buying stock or currency pairs. The purpose of trading is to generate returns with better results than buy-and-hold investing.

When it comes to trading markets, there are many options out there, and it is always important to take a look at some so you can pick the one that fits with your goals the most.

There are financial markets, which can be found all around the world, where individuals and institutions trade financial securities. Each country has capital markets, money markets, spot markets, derivative markets, and more, but every single one is different from the other.

In either case, the interbank Forex market is the largest financial market among them in terms of daily traded volume. The Interbank market can be described as a part of the financial system and currency trading between banks and institutions, that rarely does or does not include retail investors or small trading parties.

Bonds and Forex explained

The Forex market is where participants can buy, sell, exchange or even speculate on currencies. The Forex market is made of banks, investment management firms, retail Forex investors, and brokers as well as hedge funds. Forex is a market of $6.6 trillion in daily transactions, as reported by the Bank for International Settlements (BIS) in April 2019.

The bond market, also known as the debt market or credit market, is where investors can trade and exchange bonds. This is where its participants can issue new debt, better known as the primary or principal market, or buy and sell debt securities, known as the secondary market. The goal behind it is to provide long-term funding for public or private expenditures.

Top difference between the two

Now that we have defined both Forex and bond markets, we can take a step to discuss some of the differences between the two investment options so you can pick the one that fits your ones and desires the most.

  • Availability: When it comes to the bond market, you purchase one and hold it until the maturity date arrives. There are few vehicles that enable the investor to forget about the purchase for years, yet bonds will allow you to do exactly that.

It is for this reason that a lot of investors choose to purchase a specific number of bonds to diversify their portfolios and add a sense of stability to their accounts. With Forex, you will have access to a 24 hour a day marketplace from Monday to Friday. This place enables you to make quick trades in response to the market or global new events.

  • Profitability: Not many investors can claim that they have made a good fortune in the bond market. It is the slow tempo and regulated process that make bonds a safe investment opportunity. On the other hand, there is so much money to be made in the currency exchange market that one only has to look at a typical day's trading volume to understand how big Forex can be.
  • Leverage: When you buy a bond, you need to use on-hand cash or capital to make a purchase. This means that all that money is going to be tied up for months or even years. With Forex trade, you still must use your own money or margin account, but you'll be able to use the power of leverage to increase your trade's potential.

Which one's better for you?

When you look at these two markets, it becomes evident that they are wildly different investment options. The bond market represents a slower and steady way of investing with a time and place. Forex is completely different, it is quick, and it enables real-time trades and great liquidity.