Steemit Crypto Academy Season 2: Week2 | Cryptocurrency Contracts For Difference (CFDs) Trading

danielo109 (66)Beginner[1,2,3,4,10]in SteemitCryptoAcademy • 3 years ago

Hello everyone, I'm grateful to partake in the season 2 week 2 lecture on CFDs. I've learnt a lot from this lecture. Thanks a lot Professor @kouba01. This is my homework post.

Contracts For Difference (CDF)

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Cryptocurrency prices increase and decrease day in day out. Due to their volatile nature it is possible to make gains from this effect. Take for example; the price of a pen increases and decreases, and you bought a pen at $10 predicting in some few days the price would increase to about $17 and then you can sell it at and gain 70% profit of $7. In this same way you can run at a loss when your prediction is wrong and the price of the pen drops.

CDFs are based on this strategy. A Contract for Difference (CDF) is an agreement between a buyer and a seller based on price difference between the entry prices and closing prices. If you can forecast a rise or fall in prices, you can make a lot of gains with CFDs. With your good prediction skills you purchase (long position) when you expect prices to increase, and sell (short position) when you expect prices to decrease.

How do I know if cryptocurrency CFDs are suitable for my trading strategy?

CFDs have high earning potentials. On the other hand, if your prediction is false you can run at a huge loss. Below are some factors to consider before getting into CFDs.

You should have good prediction skills if you want to use CFDs. To sharpen your prediction skills you need to put in a lot of research and study the rise and fall in cryptocurrencies prices you would like to trade.
With your good prediction skills, you should know when to go short position and long position.
You should be prepared to take losses. This is because predictions are not 100% accurate.

You need to fully understand leverages and margins because they are one of the key concepts in CFDs
You should not forget it is very risky and as such do not take unnecessary risks.
Make trades in safe environments.
You should trade in short term.

Are CFDs risky financial products?

Yes. CFDs are very risky financial products. Like I said earlier, predictions are never 100%, and this is because of the volatile nature of cryptocurrencies. The prices rise and fall with no stable pattern. Margins and leverages also add up to the riskiness of CFDs. Leverage is a double edged sword. It allow you to put in a small fraction of the market value of the underlying asset when making a trade while the rest of the amount is added to support you. It allows you to put in as little as 5% of the market value. The good and bad is that, even though you put in a small fraction, you are still entitled to the same profit or losses as if you had paid 100% of the market value. This makes it very risky because you can either end up earning more than you put in or pay far more than you put in.

Do all brokers offer cryptocurrency CFDs?

Not all brokers offer crypto currency. Below is a list of top brokers in 2021 who offer cryptocurrency CFDs.

eToro
Gemini
Coinbase
iTrustCapital
CryptoRocket

How to trade with cryptocurrency CFDs on a broker.

First of, create an account from a broker of your choice. You can us eToro. Visit their website and sign up.

Screenshot from 2021-04-20 18-58-40~2.png
Switch from real portfolio to virtual portfolio to do a trial.
Select trades market. Select crypto and choose the cryptocurrency you want to trade.

Screenshot from 2021-04-20 19-33-42~3.png
Select Trade.

Screenshot from 2021-04-20 19-34-20~2.png
Click on open trade.

Conclusion

Cryptocurrency CFDs are worth the risk taking. To make sure your loss doesn't have a huge impact, it is advisable to always use risk capital. Make a thorough research about the market also and you'd be glad you took those risks.

#kouba-s2week2 #cryptoacademy #steem #trading

3 years ago in SteemitCryptoAcademy by danielo109 (66)Beginner[1,2,3,4,10]

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kouba01 (80)modProfessor 3 years ago

Hello @danielo109,
Thank you for participating in the 2nd Week Crypto Course in its second season and for your efforts to complete the suggested tasks, you deserve a 5/10 rating, according to the following scale:

Originality	Compliance with topic	Consistency of method	Quality of analysis	Clarity of structure & language
(0/2)	(2/2)	(1/2)	(0/2)	(2/2)

My review :

Medium content, in which you relied on editing information only on websites without expressing your opinion, which made the article lose the analytical dimension of the ideas. Try to find one idea in each question and analyze it to find a straightforward answer.

Thanks again for your effort, and we look forward to reading your next work.
Sincerely,@kouba01

$3.58

1 vote

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danielo109 (66)Beginner[1,2,3,4,10] 3 years ago

Thanks Sir @kouba01

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