Forex securities market: trading of stocks and bonds
In the Forex market, there are many instruments for trading including securities, currencies, precious metals, ETFs, indices, or other assets, depending on your goals and trading strategy. When trading securities, a market participant deals with monetary and commodity securities – stocks, checks, bills, bonds, and so on. The choice of security largely depends on individual preferences in applying a strategy for working in the financial market.
In this article, we will talk about the most popular financial instruments – trading of stocks and bonds, their features and differences, as well as compare the Top Forex brokers that provide the most favorable conditions and a wide variety when buying and selling these assets.
Stocks in the Forex market explained
Stocks are the most popular trading and investment instrument that allows you to get a share of returns from the activities of a business or company of any size. It is a security document, which confirms the right to own part of the business with certain rights and obligations.
Stocks constantly change in price in the Forex market, and traders actively use price changes by buying and selling securities in order to gain from the difference. In addition, derivative financial instruments on stocks allow traders to earn money not by purchasing the asset itself, but by making a forecast for price changes, which allows entering the Forex market with much less capital.
Stocks types in the Forex market
Stocks can be either common or preferred. Unlike common stock, a preferred doesn’t give the right to participate in the meeting of stockholders and vote on the issues raised, except in cases of reorganization or liquidation of the company. However, the owner of preferred stock has the right of first priority to receive income in the form of dividends, and the number of payments is fixed in the company’s charter.
Common stocks represent the right to claim dividends and give the right to vote. Traders and investors most often receive one vote per share they own to elect board members. Thus, stockholders have the ability to control corporate policy and governance issues compared to preferred stockholders.
Stock trading in the Forex market
Stock trading is one of the most popular types of exchange transactions in the securities market, the principle of which boils down to a simple concept “buy lower – sell higher”. The difference, minus commissions, will be the trader’s gain. The task of market participants is to correctly predict further price behavior.
The amount of income from trading depends on three parameters:
- Market volatility. This concept refers to the change in asset prices as a percentage. Market volatility practically does not depend on a single trader, but is a general economic process;
- Correct prediction. One of the main tasks of a trader is to correctly predict price movements, for which there are a lot of methods, indicators, and ways to analyze charts. Technical and Fundamental analysis utilize the basic skills of a trader, which will have the most impact on potential earnings.
- Amount of initial capital. The more money you have, the more money you can earn. At the same time, working through stock derivatives, you can have a small initial capital and increase it using leverage.
Derivatives for stock trading on the Forex market
In addition to buying and selling the stocks themselves, a trader can also use derivatives for this asset. A derivative is a contract by which both parties undertake or are given the opportunity to perform some action (purchase or sale) with an underlying asset such as stocks in this case. Market participants can trade stocks using CFDs, futures, options, indices, and ETFs:
- An index is a kind of basket or set of stocks that can be used in trading. The index itself is never traded in its pure form – traders operate on its derivatives, such as CFDs;
- CFD on stocks is a contract for difference in prices, where the underlying asset is securities. The trader enters into an agreement only in relation to the price, whether it goes up or down, the asset is not transferred to him. With the help of CFDs, traders get the opportunity to work with stocks in more simplified and affordable conditions with a small deposit and big leverage. Besides, there are no restrictions on short positions, and instant opening and closing of transactions;
- An ETF (Exchange-traded fund) is a set of stocks that are traded on the market as a single instrument. There are index ETFs – that is, those that copy the stock index, commodity – for a certain group of goods, for example, precious metals, industry – including stocks of companies in a single sector, and others;
- A stock futures contract means a contract whereby one party undertakes to buy and the other party sells some asset in the future at a predetermined price, in this case, security. When buying stock futures, you need less initial capital, while buying futures involves more leverage, and the owner of the futures does not have any right to manage the company;
- Stock options allow traders to earn on the change in the price of the underlying asset in its growth or fall without making a deal with the stock directly.
Advantages of stock trading on the Forex market
The Forex market provides truly ample opportunities for all traders who want to earn money by buying and selling securities. At the moment, online stock trading is one of the most common and proven ways to get a fairly high income. Compared to other securities, stocks have their advantages, namely:
- Liquidity, that is, stocks can be easily bought and sold at any time;
- Reliability – securities are legitimate and protected by law;
- No limits in terms of possible income;
- Accessibility – a trader can become the owner of a stock at any time after registering a brokerage account;
- Flexibility – market participants can buy stocks, both high and low value, in different fields of activity and market segments.
What are bonds in the Forex market?
Bonds are securities that entitle their owner to receive a predetermined income within a specified period. When buying a bond at the time of placement, the trader, in fact, lends money to the company (municipality or state) at interest. Whoever next purchases the bond from the first owner buys the debt along with the right to receive income. The main information about the bond is the maturity date (that is when the issuer undertakes to pay the principal), as well as the type and amount of income.
Bonds are considered one of the main classes of exchange-traded or financial assets along with stocks. These two instruments are most often traded by market participants.
As a rule, the yield on a bond is fixed – that is, you know in advance the size and date of payments, and the term of the bond is also known in advance.
Bond types for investment and trading
Bonds in the Forex market are divided according to several classification criteria, the most popular of which is the division by issuer type. Depending on the issuer, debt securities are usually divided into government, municipal and corporate:
- Government bonds (OFZ) are securities issued by the Ministry of Finance. By buying them, you are actually lending money to the state, and receiving income at a fixed rate. At the same time, the state acts as a guarantor of the return of your investments;
- Municipal bonds are debt securities issued by the constituent entities of the country. As a rule, they have a higher yield than OFZ due to lower liquidity;
- Corporate bonds are debt securities of companies. Potential income is higher for them than for OFZs;
Forex risk management with bonds
In the securities market, bonds tend to be more conservative and stable securities. Highly rated bonds are more reliable than stocks. They are less exposed to market risks and help traders and investors maintain their capital. Purchasing bonds along with stocks can help create a balanced investment portfolio that tends to advance from stocks but is stable in all market conditions due to bonds, to put it simply, the trader will be able to diversify the asset basket and hedge market risks in a way.
Another advantage of bonds is that they are quite liquid. In the event of a market crash, short bonds of reliable issuers can be quickly sold with minimal losses and preferred stocks that have fallen in price can be bought. Also, in a stable market situation, the yield of short bonds compensates for inflation.
In addition to liquidity and hedging, the benefits of bonds for protecting one’s capital include a quick recovery of the portfolio. If bonds are added to a portfolio of stocks, they will sink more weakly in a crisis and can recover faster to their previous values.
Stocks vs bonds in Forex trading
Trading stocks and bonds are basically similar in many ways, market participants can earn on the difference in price over time, but it is worth considering bond prices do not change as much as stocks. In addition, it is possible to use derivatives so as not to purchase the securities themselves, but to enter into an agreement on the growth or fall of assets.
However, the main difference between trading stocks and bonds is that stocks offer more closed deals in short-term active trading than bonds. Bonds are issued and bought as a safer alternative, especially in times of volatility in the stock markets, to hedge a trader’s risk.
In addition, stocks work out economic news more predictably and can fluctuate quite strongly in price, which can be efficiently used by traders, because after analyzing the market and the economic situation, you can buy cheaper in time and sell more expensive with price changes or play on derivatives by betting on a fall.
Summing up, we can say that stocks are better suited for active trading on the Forex market: they are liquid, accessible, and can fluctuate greatly in price, which, with the right approach, will allow you to make good money. While bonds are more of portfolio diversification and risk hedging security, as the price of a bond does not fluctuate much over time.
How to buy stocks and bonds in the Forex market?
The safest way to buy stocks and bonds of a preferred company is to sign up with a reliable Forex broker: they link the exchange and individuals who want to conduct transactions with securities.
The main functions of the broker:
- account management;
- execution of orders for the purchase and sale of securities and other instruments;
- preparation of analytics for the client;
- conducting training.
Forex and CFDs brokers reviewed on our website hold licenses from the strictest international regulators, and provide convenient trading platforms, and a wide range of financial instruments.
To create an account, a trader needs to register on the broker’s website. Usually, the best brokers have instructions for opening accounts on their websites. If you have any questions, you can call the broker’s support service and clarify the details. In general terms, the process of opening an account includes registration, selection of the type of trading account, software installation, and funding; then you can choose suitable stocks or bonds and start trading.
Top Forex brokers for stock trading
Stocks are a unique financial instrument that gives their owners an excellent opportunity not only to invest money and receive dividends but also to trade them with a price difference. Stock trading is one of the oldest and most popular types of investment and capital growth. On the OTC market, trading is also carried out in the form of various derivatives, such as contracts for difference (CFD), that is, it does not provide for the actual ownership of a particular stock, but allows you to play on from the difference in quotations.
Top Forex brokers nowadays provide services for trading in stocks and bonds of the world’s largest companies, as well as derivative financial instruments with the possibility of Copy trading for passive income, as well as multi-layer Forex bonus programs. Also, market participants can use trading demo accounts to test their strategies and explore new financial instruments. After comparing all the necessary criteria, we have compiled a list of Top Forex brokers for trading stocks and bonds:
XM Group Forex stock trading
XM Group is a perfect choice to trade your favorite stocks, bonds, and derivatives. Except that broker has over 1000 trading instruments including Cryptocurrencies such as Bitcoin, Ethereum, and Ripple; currency pairs indices, commodities, metals, and energy.
Traders enjoy the comfortable working process on MT4/MT5 platforms that offer various accounts such as Micro, Standard, XM Ultra Low, and Shares with negative balance protection, leverage that meets the needs of different market participants, and tightest spreads. Besides, the broker offers an unlimited demo account with a virtual balance of $100 000 so newcomers can search the market and practice trading without losing money, and traders who already joined the market are able to share their experience and earn that way.
Except for the common web version XM Group has a user-friendly mobile app to stay in touch 24/7 and a VPS service that allows traders not to worry about the speed of the Internet connection, power outage problems, or other disturbing factors.
XM Group has been on the Forex market for a long time and has set its presence in over 150 countries. The company is controlled by such reputable regulatory bodies as CySEC, IFSC, DFSA, and ASIC. In addition, XM Group has attractive seasonal bonus programs and up to 100% on the first deposit for every client (yet, they are subject to geographical restrictions). If you click the bottom right now you can get a special offer from TopForex.trade.
AvaTrade Forex stock trading
AvaTrade gives the opportunity to build your portfolio of more than 1250 instruments including currency pairs, commodities, a wide range of Crypto, CFD on stocks, bonds, indices, and even more. Newcomers can start trading on a demo account with a virtual balance of $100 000, and then switch to the real one that has stop-loss order, take-profit, and AvaProtect features.
To meet all the needs of its clients AvaTrade created different platforms such as MT4, MT5, Proprietary, AvaSocial, AvaTradeGo, AvaOptions, and WebTrader, and in case you don’t have a computer or laptop nearby, there is always an AvaTrade mobile app to check your account stay up to date with latest market news.
AvaTrade is one of the best brokers for both stocks and bonds trading. The company is regulated by several worldwide known financial authorities such as ASIC, FSA, Abu Dhabi, and the British Virgin Islands regulators.
In addition to a formidable license base, AvaTrade has such an important tool for beginners as Ava Copy Trading which gives an opportunity to mirror the deals of professional traders and become a pro or simply have a passive income. Check all the available AvaTrade features and get the special offer by tapping the bottom below.
eToro Forex stock trading
eToro is one of the largest and most popular multi-asset trading platforms in the Forex market, founded in 2007. The company offers trading in a wide range of instruments, which includes both the usual currency pairs and stocks, as well as CFDs, ETFs, and Crypto.
The company has developed its own unique trading platform, which is available both in the web version and in the app for iOS and Android. eToro’s personal account combines all the functions of the platform: account management, self-trading, and trade copying. The eToro app for Android and iOS fully replicates the features of a personal account, which allows you to deposit and withdraw funds, trade, and candlestick charts, as well as copy trades and communicate with other participants.
Clients can trade on two account types: Retail and Professional Clients. In addition, both beginners and professionals can always use a free demo account with a $100 000 virtual balance to test strategies, try trading different assets and compare order execution speeds.
eToro accepts clients all over the world and maintains the transparency of all transactions, which is confirmed by the received licenses from such demanding regulators as the FCA, ASIC, and CySEC. You can try trading with eToro right now and get a special offer from our website by clicking on the button below.
Plus500 CFD trading
Plus500 was established in 2008 and today it is one of the leading CFD trading platforms. It works with CFDs on currency pairs, ETFs, stocks, commodities, Crypto, and stock indices. In addition to trading instruments, Plus500 has the main risk management tools on its platform: Close at Profit, Close at Loss, Guaranteed Stop, Trailing Stop, and Price Alerts.
The company provides its clients with a user-friendly trading terminal, developed individually by the company’s specialists, available in several versions as a web terminal for PCs and laptops and a mobile application for Android and iOS.
Plus500 strives to make trading as effective as possible, that’s why before entering the real deals market participants can use an unlimited demo account to work out new strategies, try unfamiliar tools, test indicators, and advisers.
There are no commissions or hidden fees when conducting a Plus500 trade, instead, the broker charges a small fixed spread when trading assets. Deposits and withdrawals of Plus500 are possible through credit cards such as VISA, MasterCard, bank transfer, Paypal, and Skrill.
Plus500 has been on the market for more than ten years and during this time has managed to create a reputation as a reliable broker that is worthy of the trust of its clients, which is confirmed by the licenses received from the FCA (UK), CySEC (Cyprus), SFSA (Seychelles), AFSL issued by ASIC, FSP issued by the FMA (New Zealand), MAS (Singapore), and Authorised Financial Services Provider license issued by the FSCA (South Africa). Try trading with Plus500 and get a great offer from TopForex.trade by clicking on our button below.
HF Markets Forex stock trading
HF Markets, until recently rebranded as HotForex, allows you to diversify your portfolio with derivatives on stocks and bonds of leading international companies with low margin requirements and costs. In addition, the list of trading instruments of the company includes more than 950 instruments and assets available to traders including Forex, real stocks (not CFDs), indices, commodities, and ETFs.
There are six types of accounts available to choose from, among which there is also a micro account with a minimum deposit of a few dollars, which is good for beginner traders. There are investment offers in the form of PAMM, as well as automatic copying of HF Copy trades, and a demo account with a virtual balance of $100 000 to practice and get to know the platform.
The trading interface is represented by the MetaTrader 4 and MetaTrader 5 platforms which are available on desktop, web, and mobile versions for Windows, iOS, macOS, and Android. Also, HF Markets provides VPS service for non-stop trading without any hassle.
HF Markets is regulated primarily by CySEC in Europe. In addition, the broker has FCA (UK), FSCA (South Africa), DIFC (Dubai), and SFSA (Seychelles) licenses, according to which the broker has the right to provide investment services around the world.
For new and existing customers, the company has developed a loyalty program, bonuses, and contests, including the possibility of replenishing the account without commission. Click on our special button and get all the nice bonuses right now.
Stocks VS bonds in Forex trading - FAQ