Whether it’s Bitcoin, Litecoin, or Ethereum, now almost every country in the world accepts these digital currencies to pay for goods and services. However, things are not so clear when it comes to trading them. Can you trade CFDs for cryptocurrency if you are a CFD trader? Are you ready to learn? Then let’s get started.
How Does Cryptocurrency Trading Work?
Most cryptocurrencies are decentralized in nature using blockchain technology. One fantastic feature of cryptocurrency is that it is not regulated by the government or central authorities; thus, they are immune to government manipulation or interference. Cryptocurrency trading is buying or selling it on an exchange or speculating on price movements using a CDF account through a financial service provider.
What Are the Types of Cryptocurrencies?
Before learning how to trade cryptocurrency, you need to know the types of cryptocurrencies on the market. Currently, there are over 6,000 digital currencies and altcoins in circulation, including the actively traded cryptocurrency giant Bitcoin. Other cryptocurrencies might have limited trading opportunities, which means when you want to sell them, fewer buyers can purchase them.
For example, investments in Bitcoin and Ethereum account for about 38% and 18% of the market, respectively, making these two currencies a force to be reckoned with.
Other effective cryptocurrencies on the cryptocurrency market are listed below:
- Litecoin (LTC)
- Dash (DASH)
- Zcash (ZEC)
- Monero (XMR)
- Ripple (XRP)
All of these cryptocurrencies are generated by a process known as mining.
If you have experience with trading on financial markets, you are probably familiar with CFDs on basic assets including oil, gold, and currencies. The main advantage of CFD is that professional traders can earn even with small investments due to leverage.
Crypto CFDs amplify these benefits as there are more price movements in cryptocurrencies. In particular, price changes literally affect the profit of the crypto CFD. High volatility provides great earning opportunities for those traders who are willing to take big risks. At the same time, CFDs on cryptocurrencies are closely related to the spot market. A CFD is executed by a broker (intermediary for each trade) on the spot market, rather than simply price-pegged (like futures). That is, the strike price is formed by the aggregate market liquidity.
3 Steps to Work with Crypto CFDs
Whether you are an inexperienced trader or already have some skills in the field, considering these brief instructions on investing in cryptocurrency CFDs might be helpful in your practice.
1. Start an account
To work, you need a trading account on the platform for margin trading.
2. Fund your trading account
You can fund your trading account with the help of a broker you chose.
3. Make offers
When you open a position, a certain amount of your funds is blocked, acting as collateral. You can always withdraw funds from your balance that are not tied to any offer. When you close an offer, the collateral is adjusted for profit or loss and returned to the balance sheet. Then they can be used to open new positions or withdrawn.
Invest in Crypto CFD
Cryptocurrency CFDs allow both beginners and professional investors to participate in the crypto economy and earn money, even without owning the assets. The minimum entry threshold provides an opportunity to diversify your trading strategy and your portfolio with tools that give you access to one of the most dynamic financial markets in the world.