Crypto Academy Season 2: Week 2 – Cryptocurrency Contracts for Difference (CFDs) Trading – by @kouba01

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Hi everyone, In this homework week 2 task post, I will be answering this week’s task on (CFDs) Cryptocurrency Contracts for Difference Trading, a task by @kouba01 - I will be giving my opinion and writing about some topics relating to cryptocurrency CFD. When it comes to reading cryptocurrencies, there are many strategies and techniques that can be utilized to make profits… the aim of any trader is always to make profits. CFD is also an effective strategy that when utilized in the right way can be profitable.

What is a cryptocurrency CFD

Cryptocurrency Contract for Difference (CFD) is a simply an agreement or a contract between a buyer and a seller on a cryptocurrency asset with focus on speculation on which direction the price of the cryptocurrency asset would go, whether the price of the cryptocurrency asset would rise or fall. In CFD agreement or contract, the difference between the value of the cryptocurrency asset at the current time and the value of the cryptocurrency asset at the time the agreement or contract was made, would be paid by either the buyer or the seller.
While cryptocurrency CFD trading comes with risks, it also comes with benefits; some of the main benefits of cryptocurrency CFD trading are; CFD trading gives investors or traders the ability to increase their profit from little capital. Also, an investor or trader can still make money regardless of the price of the cryptocurrency asset.

How to know if cryptocurrency CFDs are suitable for your trading strategy

There are many ways to tell if CFD is can be a good fit as part of your trading strategy…

• If you have a good knowledge of margin and leverage, then CFD might be suitable for you
• If you are a good cryptocurrency analysts, then CFD might be suitable for you.
• If you fully understand risk management, then CFD might be suitable for you.
• If you are an investor or trader that loves to take risks for huge profits, without bothering about potential huge losses that might occur, then CFD might be suitable for you.
• If you prefer short term profits over long term profits, then CFD might be suitable for you
• If you fully understand that you always need to trade with funds you can afford to lose
• If you fully understand the high risk involved in trading CFD or any financial products.

Are CFDs risky financial products?

Yes, CFDs are known to be risky financial products especially in cryptocurrency because of the leverage and margin that is involved in CFD trading and the volatility of cryptocurrency assets. This means that an investor or trader can have huge losses on the invested capita if the trade goes against the investor or trader because of the high volatility in the crypto market.

Do all brokers offer cryptocurrency CFDs?

When it comes to cryptocurrency CFDs, it is important to know that not all brokers offer CFD trading. Trading financial products is a bold decision that requires carefulness and proper knowledge because of the potential risks involved either by losses due to price volatility or choosing the wrong broker. That is why you have to do your due diligence before making the decision to pick a broker for cryptocurrency CFD trading. At the moment, there are a couple of brokers that offer cryptocurrency CFD like XBTFX, eToro, Liteforex, Bybit etc are all platforms that offer cryptocurrency CFDs.

Explain how you can trade with cryptocurrency CFDs on one of the brokers – eToro

Etoro is one of the CFD platforms that allows the trading cryptocurrency CFD financial products. To begin the process, you have to go through a few process to start trading cryptocurrency CFDs.

Signup

Go to the etoro website https://www.etoro.com and signup if you don’t have an account with them.

Verify your account and complete your profile by clicking on the link sent to your email.

Switching to a virtual portfolio

Go to your account dashboard, you can already see the watchlist assets. Switch from real to virtual because we will be making use of the virtual portfolio which is like a demo account in other brokers. To switch from real to virtual, click on the button that says real and select virtual from the drop down.

Cryptocurrency CFD trading

To start trading CFD using cryptocurrency, you have to click on the Trade Markets tab. On the trade market page, you will see a variety of different markets that are available for CFD trading. Since we are going to be using cryptocurrency asset, you have to click on the Crypto tab. You will see different cryptocurrencies that are available, select one to start the trading. I will use BNB for this example.

Conclusion

CFD in cryptocurrency is a very popular financial product that is traded by a lot of top traders and investors. We have seen that trading cryptocurrency CFD can be very profitable and also since the investor or trader does not need to own any of the cryptocurrency and still make huge profits, however, cryptocurrency CFD trading can be very risky and can lead to big loss of investments if not done carefully. When trading cryptocurrency CFD, it is important to trade with caution and to be very careful and vigilant so as no reduce the possibility of big losses. Finally, before going into trading financial products most such as CFD, it is important to have proper knowledge of CFD trading so as to make the right trading decisions most of the time to make profits.