Steemit Crypto Academy Season 2:week 2 Homework Task(Cryptocurrency Contracts For Difference(CDFs) Trading)

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Hello steemians and cryptonians in this community.Is another week of the cryptoacdemey season 2.First of all i want to thank professor @kouba01 for such a wonderful lecture.Today we are looking at Contracts Difference For Trading(CFDs).

Question 1
What is a cryptocurrency CFD?

First of cryptocurrency CFD stands for Contracts Difference For Trading.Contracts Difference For Trading can be used to to trade many many assets and securities including exchange traded funds.CFDs allow traders to trade in the price movement of securities and deriavatives.Deriavaties are financial investment that are derived from an underlying asset.CFD is a financial cintract that pays pays the difference in the settlement price between open and closing trades.

Question 2
How do i determine if cryptocurrency CFDs are suitable for my trading.

1.First of all,investors are suppose to use the right trading positions.Some broker do not allow you to lower the leverage manually.In this case investores might consider lowering their trading positions.Whatever the case is make sure you are aware of the outstanding risk.

2.Investors are suppose to derive a trading strategy.Make sure you set-up a strategy for each trade before you open it.Investors should think how big a loss they can tolerate if if underlying price price goes by 5 percent or falls by 5 percent.

3Furtheremore,Investors should consider cutting their loses .Incase things go wrong make sure you dont start chasing your losses and that you remain to your initial plan.Set out your rules and stick to them.

4.Investors are supposed to prepare for bad days.There will always be days where your trading positions will go against you.You have to always be prepared incase you have to put additinal margin of cash.

5.Lastly,use a demo account first.Investors should begin a CFD trading with a demo account first.A demo account is a good place to start because it is a good idea to test it with an amount you will be wiling to trade in real life.

Question 3
Are CFDs risky financial products?

As there is a saying,risks is the price we pay for an opportuniy.CFDs carry risk in the same way that any financial product carries risks.If the market moves against yiu,you lose money,However the risksnin CFDs can be greater because they are leveraged products.Wherevere there is risk,there is also advatantages.here are some risks of CFDs and its advantages.

Risks OF CFDs
1.Contract For Diffrencesare complex.CFDs are complex so there is the room for misunderstanding and trading errors.

2.You could loose more than you invested.Incase you Invested 20 dollars,The most you stand to lose is 20 dollars.But with CFDs,you could lose more than you originally invested.Trading with CFD is more risky than tradition share trading as you are trading with leverage.

3.CFD providers may not act on your best intrest.Not all CFDs will act in the best intrest of their clients.That is referred to as counterparty risk

4.CFDs can be affected by market conditions.Since you are speculating the prize movements of financiaal assets such as shares,your trade will be affected by broader market conditions.

Advantages of CFds
1.No stamp duty.Unlike traditional share dealing,there is no stamp duty to pay on CFDs as you dont take physical ownership of the underlying asset.

2.Trade on both rising and falling markets.With CFD trading,you can trade on price of a product going down as well as up.

3.Resemblance to traditional trading.CFDs arent the only way of trading funancial markets without purchasing any assets.

Question 4
Do all brokers offer cryptocurrency CFDs?

CFDs offer a large or wide range of instruments,but not all brokers offer cryptocurrency trading and those that do may offer fairly low level leverage.Since it is possible to trade without paying fees to decentralized system,not all brokers
offer cryptocurrency CFDs.

Question 5
Explain how you can trade with acrytocurrency CFDs one one ofe the brokers.(using demo account)

1.First of all i opened https:// www.etoro.com

2.First of all i created an a crpytocurrency account.

3.Secondly,I applied fir a CFD account which is a straight forward process.

4..I provided details for the accounts which i was then verified.

5.I then funded the account with me credit card.

6.I now opened a demo account and practice with over $20000 of virtual friends.

Conclusion
In conclusion,to close a CFD position by yourself,just perform the opposite of your initial actions.So incase you opened a long position,sell it to close your trade.If you went short on trade positions,buy it back to close trade.The interface for closinf positions differs from platforms to platforms.

Thanks for reading my post.