What is CFD?
CFD (contract for differences) stands for contract of interest and is an arrangement made in financial trading where the differences in settlement between the open and close tradings are cash settled and are increasingly marketed to consumers. It is also an advanced trading strategy used by experienced traders and is not allowed in U.S.A. Traders can bet on the price of the asset moving up or downward. Traders who expect the price movement to go upward will buy the CFD, while those who expect the downward movement will have to sell from an opening position.
If a buyer of a CFD sees the asset price rising, they will offer their holding for sale. The investor’s brokerage account is used to settle the net difference representing the gain or loss from a trade.
And, if the trader believes the security price will be downward, an opening sell position will be placed. To close the position they need to purchase an offsetting trade. The net difference of the gain or loss is settled through their account. As a CFD trader, you don’t own the assets but you can expect the price of the asset to go up or down and use that opportunity to trade on it. CFDs exists for a speculative purpose. Some CFD brokers include: 12 Trader, 4xcube, 101 investing, Etoro and Swissquote.
How do you know if cryptocurrency CDFs are suitable for your trading strategy?
CFDs are key components of a traders portfolio. As a trader, the start of your trading journey can be so difficult to understand the cons and pros of investing and trading CFDs. The most popular mode of trading strategy with CFDs is Day trading.
Before you start trading with CFDs, always have a well planned trading strategy before you venture into the real markets.
Choosing the right strategy can prove to be stressful and difficult but without an effective strategy, your profit will be small.
There are two popular strategy in CFD trading namely: Breakout strategy and
Breakout strategy requires you to place your focus on identifying a key price level for a given asset. When the price of the asset hits your key level, you either buy or sell depending on the trend. If the market isn’t providing clear signals, the main thing is to avoid any trades.
Contrarian strategy is all about timing and you should have the knowledge that trends don’t last forever. If the price of a stock is on the decline then you need to identify a point where you think it’s near the end of the trend, then you can enter a buy position expecting the trend turning in the other direction.
For you to know your trading strategy, you have to consider this things:
Choosing a market: There are lots of markets to choose from,try and choose a market you have good understanding of. This will help you encourage any new market development.
You have to control your leverage, this is your greatest asset when you have made the right choice. Start small and keep your exposure low in comparison to your capital. Don’t be the kind of trader that turns a small account into a huge account only to end up back at square one.
Learn from experience, like they say “experience is the best teacher”. There are invaluable lessons be learned from those that have gone before you. And you need to devote some time and energy into reading the do’s and don’ts.
Are CFDs risky financial products?
Maybe or maybe not. CFD trading is risky mainly because of the margins involved. You are likely to make large profits but also large losses. However, Unlike warrants and options. CFD doesn’t have an expiration date. Traders can keep their contracts for as long as they want. For me the problem with trading CFDs is that your counterparts is also your broker. The broker is suppose to be there for you whenever a problem arises but not all the time, if you make money on CFDs, the broker is likely to lose and vice versa.
A word of advice, pls educate yourself and have a deep knowledge before trading such derivatives.
Do all brokers offer cryptocurrency CFDs?
In my opinion,Yes. First, you have to make a list of brokers, check and compare their crypto selection,fees,trading platform, deposit and withdrawal options and many more. Although not all brokers accepts US clients. Most of these brokers platforms offer free demo accounts, so you can practice and test the brokers with virtual money. Some brokers that offer cryptocurrency CFDs include: OCTFX, ETORO, BDSWISS and EXNESS.
As a trader, you have to practice trading
Using demo accounts offered by some brokers platform. Let’s me show you how to do on OCTFX.
NB:This demo account is meant for Pratice only as it provides the same trading as real accounts. The only difference is you don’t trade with real money, so it’s completely risk free.
Opening an account on OCTFX is a fast and easy process which can be done in few steps. You have to notice that by opening an account on OCTFX, you have to read the customer agreement and unconditionally accept the terms. You also have to be aware of the substantial risks involved. (This is for those opening a real account but not excluded for demo accounts owners)
First, visit their official website http://octfx.com/ on getting to to the landing page, this is usually the homepage of every websites, scroll down a bit and you will see options.
Next step, after clicking on create a demo page, you will be directed to their account opening page and must fill all your details correctly and proceed to the accounts opening button and click. Or you can sign up with your Facebook or Goggle accounts.
Finally, your account has been created and has been credited with virtual money to trade on their platform. start trading and practice, click on practice and you will be directed straight to your demo account.
Crypto currency have come a long way in terms of popularity and technological advancements. The market cap was estimated to reach as high as $1-2 trillion dollars in 2018. CFDs are simple financial instruments which allows the individual to predict the price of an asset.
Thank you for @kouba01 reading my post.