Steemit Crypto Academy - Homework Post for [@kouba01]

Hello everybody,

Welcome to this post. Hopefully, all of you will be good and enjoying your health with the grace of God Almighty. This is actually my homework post for dear sir @kouba01 from Tunisia. I have read the whole of the post of dear sir and I have understood all the aspects very well. Our topic of discussion today is 'Cryptocurrency Contracts For Difference (CFDs) Trading'. So, let's start our today's task without wasting our time.

Source from Professor's post

There are several questions asked by our Professor as the task for this week. Let's explain these questions accordingly.

(1)

What is a cryptocurrency CFD?

As all of us know that the market of cryptocurrency is so volatile that the prices of the assets can decrease or increase variably that it attracts the minds of the traders and the investors. So some of the traders wanted to avoid the loss that could be made by the volatility of the cryptocurrency. There are several ways for crypto traders and investors to get into the Crypto market. One can also get benefit from this volatility without getting into the market. This method is known as CFDs.

CFDs simply stands for the Cryptocurrency Contracts For Difference and it can be defined as CFD as a contract for an asset or a currency with the company of the respective asset or currency. If you are trading CFDs then you just assume and expect that the value of this underlying asset or currency will either goes upward (Provide profit) or goes downward (Loss). In this type of crypto trading, you do not buy or purchase the asset in reality but you just predict the price of the asset and trade on this asset.

Consider you have predicted a direction of the value of the asset. If the price goes towards your predicted direction then you will surely be awarded a profit based on the number of units it moves. And if the value of the asset goes toward the opposite direction which you have predicted then you will lose the number of units it moves.

Source

There are two types of CFDs:

• Long Position:

In this type of CFD trading, one expected the price of the respective asset will go up in the near future and so he buys the asset and he will get benefit from this increase in the price. By doing the correct Forecasting through Technical, Fundamental, and Sentimental analyses, one can get better profit from this circumstance. It is also known as Purchase.

• Short Position:

In this type of CFD trading, the trader expected a decrease in the value of the asset and considering this decrease he sold his asset to avoid the loss. One can also buy the asset when the price decreased.

(2)

How do I know if cryptocurrency CFDs are suitable for my trading strategy?

As we know that everyone has his own aims and thinkings about different things and have his own management of the difficulties and hurdles of the way to success. Similarly, in the world of cryptocurrency, every trader and investor has their own capability to enter the market according to their approach and ability.

The same is the case with cryptocurrency traders. As we all know that the values of cryptocurrency are very volatile and these prices and values change variably. But CDFs avail the traders having small amount for invest and CDF provide a safe ride for the cryptocurrency traders and investors. CDF gives a golden opportunity for those traders who want to make a very large profit by small investment and the CFD strategy will help me to earn more profit. By using this trading strategy one can get a profit of about 10x, 20x, or even more than the invested amount.

The thing which is needed to earn a better profit is the true and right Price Forecasting which is based upon the trader or investor experience. If one is a very good price predictor or price forecaster then he can predict the market trend of the selected asset. If his predictions come true then he will get better profit and in this way, CFD trading strategy provides a golden opportunity for those who are good forecasters and wanted to earn a large profit from a small investment.

The CFD strategy is very useful to those traders or investors who want to earn profit by making the right price predictions. Suppose I predicted that the value of a selected asset will go upward then I will adopt the Long Term strategy and could obtain huge profit by purchasing an asset and holding it for the long term. On the other hand, If I predicted that the price of the respective asset will go down in the near future then I will adopt the Short Term strategy and sell the asset and get profit also. So in this way, the CFD strategy helps us to earn better profit through the Large Term and Short Term strategies.

So according to me, the suitability of the CFD trading depends upon the nature and the capability of the trader. There are thousands of traders which joined the CFD trading strategy but some of them joined for a very short time and leave the trading in no time. But some of them are long-term traders who joined the CFD trading strategy and earn huge profits by predicting the values of fluctuating rates of the assets. If someone thinks that he is not secure in trading then you can adopt this strategy because in CFD the trader is not responsible for the loss or hack of the trading but he is only responsible to predict the future market trends.

(03)

Are CFDs risky financial products?

Yes, this is the answer to this question. As we all people know that it is a natural phenomenon that the thing which has benefits also have some disadvantages and risks. The same is the case with the CFDs trading strategy. CFD has many advantages as well as many disadvantages in the crypto world. Suppose we predicted that the rate of the selected asset will go upward and we buy these assets and wait for their top value. In this way, we can get huge profit but on the other hand, if the market trend opposes our prediction and the price of the chosen asset go down then we would have to bear the loss of this trend.

In the CFD strategy, there is no guarantee that the price of the asset will go upward. We have to put the whole of the invested amount as a bet on the single choice. There are so many possibilities, in this case, the price of the asset can go upward as well as also can come to the lower level. So this type of strategy is also very risky. If the price goes up then we will definitely get profit. But there is also another possibility of a fall in the price of the asset. If the price falls, then the trader definitely goes into the loss.

So from the above discussion, it is cleared that the CFD favours the traders or investors who have great experience in the trading world. If one is a good price predictor then he will definitely make a better profit from this kind of strategy but on the other hand, the person with no experience and not a good forecaster then there are possibilities that he might lose the whole of the investment which is put in by him. This is the real meaning of the risk.

(4)

Do all brokers offer cryptocurrency CFDs?

The answer to this question is NO. As we all know that there are thousands of cryptocurrencies in the market. But no all cryptocurrencies are available in the CFDs trading strategy. There are a number of brokers that offer CFD trading for different assets but no for all. The CFD trading is mostly done with stable coins but different brokers also offer CFD trading for other crypto assets.

All the brokers do not offer CFD trading as most of the CFD trading is available for the top crypto projects and their respective assets. Most of the brokers offer those crypto assets that are going on-trend on the market page. The assets which have high market capitalization and have high prices are offered by different brokers.

Some of the Brokers which offer the CFDs are :

• eToro
• Alpari
• Alpho
• Alvexo
• Amana Capital
• AMarkets

(05)

Explain how you can trade with cryptocurrency CFDs on one of the brokers (Using a demo account).

As mentioned above that there are a number of brokers that allow CFD trades and in this section, we will learn how to do a trade of the CFD cryptocurrency by using a demo account on the eToro broker. Let's begin this,

• First of all, go to the browser which you use and search etoro.com.

• You can see this page on the screen and you have to select the Register Now located at the top of the page.

• Then, you have to fulfil all these bars to register your account on eToro and for CFD trade.
  

• The next step is to Complete your profile. After completing your profile you have to select the Virtual Portfolio option, As mentioned in the above screenshot.

Now click on the Go to Virtual Portfolio option to create your virtual portfolio and to do virtual trading of CFDs cryptocurrencies.

• Here you can see at the bottom of the page. The first box mentioned in the above screenshot shows the Total Available amount in our virtual account. The second box shows the amount which we have invested in the CFD asset. The third box shows the profit gain by the CFD trading (If any).

• I want to trade the MARA currency. In the first screenshot, you can see the watchlist and I clicked on the MARA option as I was interested in this.

• On clicking this, you can see the menu which is shown in the second screenshot. You can change the invested amount from here.

• Now click on the Set Order option to place your order in the CFD trading.

So this is the method to trade with cryptocurrency CFD on the eToro broker.

So, that's all about today's task. Hopefully, all of you will like this post.

Special Thanks dear sir @kouba01 for his precious lecture and I am impatiently looking forward to his review to my this post.

Regards Goes To @steemlover63