Crypto Academy Season 2: Week 2 || Homework 2 for @kouba01

Hello everyone, welcome to my homework post for the week 2 of the 2nd season. I'd like to thank professor @kouba01 for the lecture and guidance, It's actually helping get better with crypto. I'm here to submit my work and any comment and criticism from my lecturer would be gladly noted/welcome and taken into consideration.

I would start with the homework task by going by the questions being asked.

source

• What is cryptocurrency CFD?

First of all, just as it was made clear in the notes of the lecturer, the full meaning of the CFD is Contract For Difference.
From my research and understanding on the meaning of CFDs, it is something like an agreement or contract(just as the name suggests) between two persons, parties or groups( it just has to involve a buyer and a seller) which is normal for any transaction, but in the CFDs, it allows the investors(or let's say buyers) to trade the price alterations of the various financial assets. I got to understand from the post that when you trade CFD, you can only expect the value of the asset to either increase or decrease since you do not really own it. And since it allows you to predict the future prices, you can either choose to buy( which is also termed as the "long position") if you feel the price will rise or sell(short position) if you feel the price is going to fall for you to run at a loss.

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

Before you can find out the most suitable trading strategy for you, you have to first do your researches and investigations and also have to bear in mind that not all investors will gain profits from the asset price changes so it is something like a risk.
Before you can know if crypto CFDs are suitable for your strategy of trading, you have to be aware of these;

• Since trading crypto isn't risk-free, you have to bear in mind to accept all losses if things go in that manner.

• And also, before you can deal with the CFDs, you have to be well-versed in forecasting so as to know when to purchase or sell.

• You also have to know the usage of the margin and leverage(which makes it very complicated and risky). Once you know your way with these two, you'll be good to go.

• The capital or money that is going to be invested shouldn't be one used for another project or trading. It has to be a capital which, even when lost, won't cause much regrets and loss since it is very risky.

• Are CFDs Risky Financial Products?

The simple answer to the question is a very big "YES". It is very risky to trade in crypto CFDs. It requires a lot of knowledge to deal with and if you are not good at working with the principle of margin and leverage, you just have to forget about it since trading CFDs is solely based on these principles. A simple mistake can lead to a very huge loss.
Also, it can even happen that you know everything about the margin and leverage but as we obviously know, cryptocurrency prices do not stand at one point for long, they always fluctuate; going up and down in that manner always. A trader can lose massively if the price don't favor him or her. It's always better to trade with risk capital as I already mentioned so you wouldn't really feel the impact if you lose. so yeah, it is very risky.

• Do all brokers offer cryptocurrency CFDs?

Not all the brokers offer crypto CFD but there are others who do this.
Below are some of the brokers that offer CFDs;

EuropeFX
eToro
Plus500
FXTB
FXVC

• Explain how you can trade with cryptocurrency CFDs on one of the brokers (Using a demo account).

From the post of @kouba01, I learnt how to create a eToro acount and also learnt that the demo trading is free and the results are completely real. Also, there are no risks or costs.

• First of all, I visited the eToro site

• I created an account the switched from the real to virtual portfolio

• After that, I tried depositing some funds but because I do not have any credit card, I could not proceed

• However, if you have a credit card and wish to fund it, you can fill in the details to proceed.

• You will then visit the virtual portfolio to check if it has been successful and it is likely to be successful.

• You move to Trade Market option and search Ethereum(required from lecture)

• After you are done with all these, you then click on Trade
  Below are the steps I followed (Screenshots)

CONCLUSION

Having learnt all these, one can know that trading CDFs has its merits and demerits but care should be really taken about the disadvantage part of it(the risky part). One must gain thorough knowledge before venturing it, and it is also advisable to invest with risk capital as explained earlier. However, if utilised well, one can gain much profits as needed.
CDFs are a good thing and is making cryptocurrencies more efficient and making the world a better place.

Thanks to professor @kouba01. I hope my work will be commended but I welcome any criticism and corrections.

THANK YOU

All pictures(without sources) were from screensnips and screenshots from PC and phone respectively.