Greetings everyone,

I much delighted to take part in the second week’s lesson of our noble professor @kouba01. I am looking forward to presenting a beautiful article for review in line with the task of this week.

We have been tasked to give solutions to some series of questions in line with the lecture of our hardworking professor @kuoba01.

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WHAT IS CRYPTOCURRENCY CFD

Cryptocurrency CFD is a combination of two terms which I will like to separately define. A Cryptocurrency is a currency that is in a digital form and not physically seen like other currencies. These currencies are self-centered that is they are not controlled by any financial authorities.

CFDs on the other hand stands for Contract for Difference, they are accepted rules in line with either a commodity or cryptocurrency.

Bringing the two together, we have Cryptocurrency CFD to be means by which investors are able to assume the price change of a cryptocurrency. Be it Bitcoin, Litecoin or Ethereum.

That is, with Cryptocurrency CFD, investors are given the chance to either buy or sell a cryptocurrency asset by the broker. In this case, it depends on the particular investor as to whether he or she will trade the asset in a position of either long or short position. What the investor will now be hoping for is for either the price of the asset he or she is trading will rise or drop. In this case the outcome for the trade falls on the investor.

In summary, Cryptocurrency CFDs are types of investments that are carried out on contracts involving a trader and a broker who presents the contracts. The investor decides which position to trade with that’s either selling or buying position. The outcome of the trade by the investor that’s be it profit or loss will be agreed by the broker and the investor.

DETERMINING IF A CRYPTOCURRENCY CFD IS SUITABLE FOR MY TRADING STRATEGY

As a result of how leverage the products of Cryptocurrency CFDs are, the trading strategy is not applicable or suitable for every investor. That is before I will be able to trade with a suitable strategy I should have in me some trading characteristics.
This can be determined by the ensuring that;

1. I am able to experience any high cost of trading risks. That is, no matter the situation I find myself in I will be able to endure the risk involved in the trading.
2. I should have a short term plan in my trading strategy. This is will help avoid long term problems.
3. I should have a low capital as a startup for my trading process.
4. Since cryptocurrencies are very expensive to purchase I should be have it in mind that I am going to trade with highly expensive assets so I should be prepared for that.
5. I shouldn’t be too centered on making huge profits since becoming rich doesn’t happen overnight with cryptocurrency. I should appreciate the small profits I get from trades I do this will help determine the best cryptocurrency suitable for me.
6. Last but least, I should also be able to determine the best and gaining trading environment through the CFD broker.

ARE CFDs RISKY FINANCIAL PRODUCTS

Yes! CFDs are risky because anything dealing with trading in way of profit can also result in a loss therefore there are risks involved. The risked involved are listed below.
 Bearing of loss; when your position doesn’t go well at the end of the contract, that is, at the end of the contract, when there is a loss outcome, you the one involved bears the loss alone.
 High risk in investment; the risk involved in investing in CFDs are extremely higher than that of crypto trading. This is because the products of CFDs are leverage financial products.
 High cost of funding; the charges involved in CFDs sometimes go too higher that makes it very difficult to acquire
 Changes in price; the price of CFDs have the chances of changing with respect to events that are unforeseen. This therefore goes in a long run to bring about changes in market.
 Changes in market; in general, the market tends to be volatile sometimes therefore affecting the price of a product and also the position. This goes in a long run to the losing of money of the individual.

MERITS OF CRYPTOCURRENCY CFDs

• Easy trading since you can trade cryptocurrencies with your choice of fiat currencies.
• There is safe environment for trading with a broker giving protections
• Simple transactions since you don’t need to go through difficult processes of acquiring cryptocurrencies or getting tokens in wallets.
• High chance of making great profit
• With a bearish market, the individual or investor is at liberty to use the short term position

DEMERITS OF CRYPTOCURRENCY CFDs

• Fees paid for certain positions within a day sometimes are extremely higher than the profits made within a long term.
• Great losses can be recorded in cases where there is poor management of trading margin.
• There are sometimes trust issues between the investor and the brokers in terms of the prices. That is whether it is in line with the market owns.

DO ALL BROKERS OFFER CRYPTOCURRENCY CFD

The answer to this question is NO. Why because, it’s not all brokers that offer cryptocurrency CDFs. Also it isn’t compulsory that anytime a transaction is take place there should me an intermediary (middle man). In addition, transactions can be made without making payments in forms of fees to a centralized exchange system.
Those that offer cryptocurrencies are;
• Swissquote
• Henyep Capital Markets Limited
• eToro
• City Index and so on.

HOW TO TRADE WITH CRYPTOCURRENCY CFDs USING A DEMO ACCOUNT ON ONE OF THE BROKERS

This is going too made possible by the usage of my credit card that’s my visa card and using eToro as my broker.
Below are the steps are undertook and screenshots taken are shown below.
Step 1
I visited the website of my broker which is etoro.com and created my account by switching the portfolio from real to virtual.
Step 2
Using my Visa card as my credit card and entering the necessary information for my profile.
Step 3
I made some transactions by depositing some funds into my demo account
Step 4
Verifying my transaction had gone through successfully, I proceeded to the trade markets to trade.
Step 5
Looking out for Ethereum since that’s the blockchain we dealing with in this lesson, I made a trade of $100,000.00

Here are the screenshots I took during the process.

CONCLUSION

I am much grateful to our noble professor @kouba01 for this wonderful lesson. I can say I have enjoyed it and leaned a lot about cryptocurrency CFDs. Trading with this currency brings a lot of profits in the short term position which is a positive addition to most investors.
I am looking forward to learning more @kuoba01 because I really admire your lectures.
Thank you for your attention.