Hello everybody, this is my homework post for week2, Season 2. It is an amazing lecture delivered by Professor @kouba01. I have learned many things and now it is my turn to submit my homework.

What is Cryptocurrency CFD?

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As we are now well aware of the term Cryptocurrency that is used for digital currency whose physical entity does not exist. So, it can be said that it does not exist physically but digitally.

Now let us talk about CFD. CFD (Contract for Difference) is a contract to trade an asset without having the asset in possession or in any kind of wallet. Trading is carried out on the price of an asset and the difference in price determines the profit or loss to the trader.

In CFD trading, a trader can trade both ways, Buy or Sell. Buy is also termed Long Position while Sell is termed Short Position. A trader can take advantage of either increasing or decreasing value of an asset. When a trader expects the value to increase, he can take Long Position. On the other hand, when he expects the value to fall, he can go short by taking Short Position.

It can be very profitable trade as well as a trader can suffer great loss. Hence it should be done with great amount of care and good knowledge of market like price forecasting. Every point of difference in value of asset gives profit or loss and it will be multiplied by the number of units a trader has bought or sold.

Is Cryptocurrency CFDs are suitable for me?

There are some points that should be highly recommendable to be taken into consideration by the trader before starting trade CFDs. These points are given below.

1. A trader should be able to afford loss because it is very volatile in nature.

2. Only risk capital should be invested in such trading, because the nature of cryptocurrency is very volatile and all investment can be washed out in matter of minutes.

3. Cryptocurrency is very costly and not everyone has such purchasing power. So a trader with low capital can take part in CFDs trading as leverage is provided by the brokers.

4. Short term traders should adopt CFDs trading as it is very suitable for short term trading.

5. Always use platforms of regulated brokers offering CFDs trading.

6. A trader should be able well equipped with the knowledge of margin and leverage trading.

7. Trader should be able to make analysis to predict the future value of an asset through technical or fundamental tools.

Are CFDs risky Financial Products?

CFDs are very risky financial products and trading CFDs is very much risky. As we discussing cryptocurrency CFDs, cryptocurrency is very volatile in nature as you can take example of today on 23-04-2021, Bitcoin has fallen significantly and other crypto assets are also following Bitcoin, So, if a trader has predicted it to fall, then he could have made huge profit. While on other hand, a trader who has taken long position could have suffered great loss. As leverage is part of this trading, a trader will have to be very careful. If the market moves in the opposite direction of the trade, trader has to exit the market before it reaches the minimum margin required by the broker, and in such case, all the investment of the trader would be lost.

Do all brokers offer Cryptocurrency CFDs?

There are many brokers in the market but not all the brokers are offering cryptocurrency CFDs. Very few brokers are offering cryptocurrency CFDs and I have given list of few top brokers who are offering crypto CFDs.

eToro
BitMEX
PrimeXBT
XBTFX
easyMarkets

How to trade with Cryptocurrency CFDs (using demo account).

I opened my account in https://www.easymarkets.com as it is available in Pakistan. After necessary verification, I opened Demo account and started trading on it. Screenshots of trading are given below.

Choose the asset you want to trade and click on Buy or Sell. I have choosen to Buy XRP.

After clicking on Buy, the next interface will appear as given below. It will appear after successful trade.

It can be seen from the below screenshot that trade has been opened.

Conclusion.

Cryptocurrency CFDs can be very profitable if done with proper knowledge and price forecasting. Only thing to be considered is that Only Risk Capital should be invested in such trading as there is high volume of risk is involved in it.

@kouba01

Thanks and Regards,

@babawattoo