By Cryptocurrency has been in the limelight ever since the rise of Bitcoin, Ethereum and many other successful cryptocurrencies. Due to this rise in popularity, the growth of ways to trade it has also increased, now you can trade crypto through CFDs.
CFD stands for Contracts of Difference which allows people to trade assets through contracts. In CFD trading, you can own a fraction of an asset without taking physical ownership of it. So basically you only own an asset’s underlying value so that cuts the hassle of needing storage.
So if you’re a new trader and want to venture into Crypto CFD trading, down below are their FAQs to help you better understand what it’s all about:
How does Crypto CFD trading work?
Crypto CFDs allow traders to profit from wagering on future market movements of specific cryptocurrencies without the need for grand capital. So this is popular for starting traders as well as small traders. But of course, just like any other form of trade, crypto CFD trading also carries risk along with it.
A trader in the market profits from speculating so you need to have a concrete trading strategy in place to predict the market well. To start, you first need to put down a small percentage of an asset’s value, for collateral purposes.
And for this trade, it has to be traded in currency pairs such as BTC/USD, ETH/USD, BCH/USD, LTC/USD, XRP/USD and BTC/ETH. And even though your pairs are limited, the chance of profit is still high.
But as a novice in this trade, we recommend you start off with one or two pairs and then increase once you get a hand in trading with crypto CFDs.
What are the pros and cons of Crypto CFD trading?
Although this has been regarded as a great trade for all sorts of investors, this still has its fair share of pros and cons. And what better way to know a trade than knowing its advantages and disadvantages? So to help you get well acquainted with Crypto CFD trading here’s a list of its pros and cons:
What are the Pros of Crypto CFD trading?
- Lets you start trading with little capital. In other words, it gives traders “leverage.”
- Is high in volatility allowing you higher chances of profiting big.
- Allows you to have full control over your trades.
- Offers limitless trading! So you can open various trades all at once.
What are the Cons of Crypto CFD trading?
- They still have linked costs that can be higher than other types of trades.
- Considered to be pretty volatile.
- If untrained or unprepared, the chances of losing trades are high.
- Consumes high levels of energy due to mining activities.
What are great trading platforms for Crypto CFD trading?
To make the most out of your trades in Crypto CFD trading you need to work with platforms that specialize in them. So to give you an idea of trading platforms for Crypto CFD trading, here’s a list to consider:
- Pluss500 – Apart from their great trading features, this allows traders to open an account with them swiftly and easily. Plus they offer quality customer service.
- Pepperstone – Has a growing variety of tradable markets, allows traders to open accounts quickly and easily and offer great customer service!
- Eightcap – Offers low forex fees, allows traders to open an account seamlessly and deposits and withdrawals are free of charge!
Are Crypto CFDs legal?
Depending on the country you currently reside in, it may vary. But currently, around January 2021, the Financial Conduct Authority or better known as FCA has banned the practice of Crypto CFD trading in the UK. But other than that, there have been no recent announcements of policies made in regard to bans and restrictions.
Take away
Now you know a good sum about Crypto CFD trading, you can now make a more accurate decision if this trade is for you or not. This trade has been pretty recent but has managed to grab tons of new traders due to its popularity.
And so far, traders have been prosperous enough to keep staying in this trade. But then again, what might work for others, may not work for you and vice versa. So if you’re thinking about investing in this trade, take small steps before wagering big! Who knows this trade might just be your niche market.
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