Hello guys, I am very happy to be part of another week of the Steemit crypto Academy. This post is my homework submission to professor @kouba01 and it is on the topic, Cryptocurrency CFDs. I want to use this opportunity to thank the professor and the other professors of this community for all the hardwork they are doing.

Cryptocurrency CFD

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The full form of CFD is Contract For Difference. Meaning cryptocurrency Contract For Difference.
This involves trading on assets that are not owned by the trader but rather you can predict whether the price of the asset will increase or decrease. In this case, if the trader thinks the price of the asset will increase, then he is in the position to buy the asset. Also if the trader thinks the price will go down in the future, he/she can decide to sell it. So in simple words, you are just predicting the change in the price of an asset in the future.

How it Works

1. Spread Commission; This basically talks about when you can buy an asset and when to sell (the sell and buy prices). With the sell price, it is the market value in which the asset reaches and the trader makes a bid for the asset. At this time the market value is a little lower than the current price. It is also termed as “Short CFD”.
   The buy price on the other hand shows when the trader has to sell the asset that has been bought earlier. At this rate, the market value goes a bit high than the current value of the asset. This act can also be termed as “Long CFD”.
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2. Deal size: The size of a contract is determined from the asset at stake. Which means the smaller the asset, the smaller the contract and vice versa.

3. Duration: The duration of a CFD trade does not have any fixed time, but rather it is determine by the trading opposite to the currently opened trade. That is, a short CFD can be ended with a long CFD and vice versa. Also leaving a CFD trade overnight may suffer some charges.

4. Profit/Loss: the profit or loss of any trade can be calculated with the simple formula below;
   Profit/loss= (number of contracts x value of each contract) x (closing price - opening price)
   In a case of charges, the charges are subtracted from the profit gained or the loss gained.

How to determine if Cryptocurrency CFDs are suitable for my trading strategies.

1. Always have it at the back of your head that buying crypto may be very expensive.
2. You should learn more about the cryptocurrency trading with a demo account.
3. You should always seek for a secure platform in trading.
4. Start trading with a low capital.
5. Traders should sometimes be opened to take risks.
6. Because of the volatility of assets, one should be ready to make losses

Are CFDs Risky Financial Products?
Of course yes, they are risky products. The assets are usually exposed to several factors which influence the market value of such assets. With that, the market value may go significantly high or significantly low which may cause high profit or high loss.
Another risk which may occur is the improper use of margins and leverages. It is possible for you to gain more profit from your investment and it is also possible to run more loss from your investment. This may occur if you take a 20% leverage of the asset and your prediction is wrong, you are likely to get 20 times loss of the capital invested.
The last one I will talk about is the charges involved. In a case where you are trading overtime, you are likely to be charged at very high price and you might have been thinking of getting a high profit. But when this charges are deducted, you a left with just a little profit. This makes trading on CFD products very risky.

Advantages & disadvantages of CFDs

Advantages

1. Price volatility; the rate at which prices of assets go up and then can either be good or bad to the trader. If the price goes up, the trader gets more profit, but if it goes down, the trader suffers a loss
2. Easy to setup: It doesn’t need too much of technological experience to start trading. This is because no wallets creation are involved.
3. Leverage: You don’t necessarily need to buy the asset upfront but rather you can buy a portion and if there is profit, you gained the profit.

Disadvantages

1. Risk: Since prices change very fast and huge it may lead you to huge loses
2. Weak industry regulation: The CFD companies is based on popularity. If you are trading with a company with less reputation, you are likely to put yourself into spams and scams.
   Summary of the Advantages and Disadvantages

Advantages	Disadvantages
Easy to setup	It is risky
Higher Leverage	Weak regulation
Trading from variety options

Do all brokers offer Cryptocurrency CFDs?
Not at all do all brokers offer cryptocurrency CFD. This depends on the broker you are trading with. Some brokers like to involve cryptocurrency CFD as part of their business and others too don’t. Some brokers I know that involve CFDs are; ETORO, PLUS500 and XTB.

Explain how you can trade with cryptocurrency CFDs on one of the brokers (Using a demo account).
For this part of the assignment, I will be using the ETORO platform. Follow the steps below to learn how you can trade with cryptocurrency CFD on ETORO.

1. Open the link provided and signup. ETORO
2. To use a demo account change the real button to virtual mode in order to start using a demo version.
3. Scroll down and click on buy on your preferred cryptocurrency( I will be using Bitcoin for this demonstration)
4. Window will appear asking for you to adjust to any amount you want to buy. After adjusting the amount, click on open trade.
5. A trade will open, then you look at the bottom part of the screen, you will see a place indicated as profit. If it shows green, then it means the market has increased, but if it shows red then it means the market has reduced.
   I will demonstrate all the steps in the pictures below;

This is what you see when you open the link. Click on join now.

This appears after you click on join now. You can choose to join with your Facebook or Gmail or more so you can go ahead and enter your preferred user name and password. Make sure you tick all the boxes before you click on Create account.

After you have successfully created an account change the Real option to Virtual before you can start using a demo account.

Click on the circled portion to buy your virtual Bitcoin.

After you click on buy, this window appears so that you can adjust the amount you want to buy. After adjusting click on "open trade"

The circled portion will tell you the profit/loss made. When it is negative and red, it means loss and when it is positive and green, it means profit.

Conclusion

From the looks of it, trading usually requires starting with a little capital. Also before you start trading, one should always make sure to learn about such trading platforms before before going ahead to start any trade. It is also advisable to start with a demo account, that way you will get the experience and get to know how it works.
Thanks for reading, that will be all for now.