What is a Bond?

What is a Bond?

A bond is a debt instrument issued by governments or corporations to raise capital. Forex traders watch bond yields because they influence interest-rate expectations and cross-border capital flows.

Bond Basics

• Coupon: The periodic interest payment.
• Yield: The investor's return relative to price.
• Maturity: The date principal is repaid.
• Credit risk: Determines the spread over risk-free benchmarks.

Trader Applications

• Rate differentials: Compare U.S. Treasuries with German Bunds when trading EUR/USD.
• Risk appetite: Flight to quality pushes investors into top-tier government bonds.
• Carry trades: Yield spreads justify long positions in higher-yielding currencies.
• Curve signals: An inverted yield curve may foreshadow recession and currency weakness.

Practical Playbook

• Define context on higher timeframes, then execute on intraday charts.
• Wait for confirmation (acceptance, momentum, or confluence) before entry.
• Size positions conservatively and place stops at clear invalidation levels.
• Adapt to session dynamics; conditions shift between Asia, London, and New York.

Common Pitfalls

• Forcing trades without alignment across timeframe, structure, and catalyst.
• Ignoring spreads/slippage during news or thin liquidity.
• Moving stops or adding to losers instead of honoring the plan.

Illustrative Example

Build a simple playbook: identify bias, mark key zones/levels, define triggers and invalidation, and pre‑set targets for 2–3R. Journal results by session and setup to refine rules. Over time, consistency—not prediction—drives outcomes.

Practical Playbook

• Define context on higher timeframes, then execute on intraday charts.
• Wait for confirmation (acceptance, momentum, or confluence) before entry.
• Size positions conservatively and place stops at clear invalidation levels.
• Adapt to session dynamics; conditions shift between Asia, London, and New York.

Common Pitfalls

• Forcing trades without alignment across timeframe, structure, and catalyst.
• Ignoring spreads/slippage during news or thin liquidity.
• Moving stops or adding to losers instead of honoring the plan.

Illustrative Example

Build a simple playbook: identify bias, mark key zones/levels, define triggers and invalidation, and pre‑set targets for 2–3R. Journal results by session and setup to refine rules. Over time, consistency—not prediction—drives outcomes.