Cryptocurrency Contract for Difference (CFD) is a new trading instrument which enables you to trade a cryptocurrency without actually having to own it. The Cryptocurrency CFDs trading method is similar to that in the Forex market: Go long if you think the crypto coin’s price will rise, and go short if you expect it to fall.


This article will tell you everything about Cryptocurrency CFDs trading.


6 Advantages of Using Cryptocurrency CFDs


Compared to trading cryptocurrencies via crypto exchanges, trading cryptocurrency CFDs is much more beneficial. Below are its advantages:


  1. Very easy to get started
  2. Need no crypto wallet to start trading cryptocurrency CFDs
  3. No need to build a secret bunker to hide your crypto coins, or simply put, no need to worry about where to cold-store your cryptocurrencies
  4. You can benefit from both downward and upward movements of cryptocurrencies
  5. You can magnify gains using leverage
  6. You can trade with regulated brokers

Trading Cryptocurrencies vs Trading Normal Currency Pairs


Trading in the Forex market is quite similar to trading in the cryptocurrency market: Traders exchange a currency for another currency. However, they are not completely the same. If you are a Forex trader and decide to cross into the crypto market, keep the following notes handy:


  • The crypto market’s liquidity is much smaller than the Forex market’s. That’s why cryptocurrencies are more dynamic and more unpredictable than normal currencies.
  • The crypto market is available 24/7, while the Forex market – only 24/5.
  • Cryptocurrencies’ drivers are separate from normal currencies’.

Getting Started in Trading Cryptocurrency CFDs


Ready to jump into the Cryptocurrency CFDs world? Below are the steps to get started:


1. Choosing a broker which offers cryptocurrency CFDs


There are dozens of brokers out there providing you with cryptocurrency CFDs; you can find them with a simple Google search. After having the list of those brokers, select your right one based on the following criteria:


  • The broker must be regulated.
  • It should offer low spreads and commissions.
  • The broker’s required minimum deposit fits your trading capital.
  • The broker’s platform is easy-to-use.

2. Opening a trading account


After selecting a broker, you will need to open an account to start trading cryptocurrency CFDs. Below are the steps:


  • Fill your personal information which is required by the broker in the registration form to sign up.
  • Verify your phone number and email if needed.
  • Complete the broker’s verification procedures by uploading the copy images of your documents (for example National ID card, Passport, Driving License, Utility Bill, Bank Statement, etc.).

3. Build a trading strategy


It’s hard to succeed in trading without a strategy. Therefore, take your time to build a proper one.


Many market participants trade based on the fundamentals of cryptocurrencies. They analyze a coin’s prospect and look into the factors that will likely affect the coin’s price in the future. If you are a crypto expert, you should do so. If you aren’t however, technical analysis is also a good choice. You can find or build for yourself a proper technical system based on your trading approach (short-term, mid-term, or long-term). Remember: you can always combine both technical and fundamental analysis to make more accurate predictions.


The Bottom Line


A Cryptocurrency CFD is a perfect alternative to the traditional crypto trading since it brings more benefits. However, margin trading may make CFDs riskier, especially when it’s used on volatile cryptocurrencies. Therefore as a crypto trader, make sure to equip yourself with sufficient knowledge and never risk more than you can afford to lose.

 

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