Steemit Crypto Academy Season 2: Week2 | Cryptocurrency Contracts For Difference (CFDs) Trading
Steemit Crypto Academy Season 2: Week2 | Cryptocurrency Contracts For Difference (CFDs) Trading| By @g0h4mroot.
In this new task I will try to give my best!
introduction:
In this section we will talk about CFDs, which are, how to use them, how many types exist, whether they are beneficial or not and their advantages and disadvantages, we will also try to demonstrate it in a practical way with our own images and screenshots.
I hope you like it.
In order to enter this wonderful world of trading and cryptos, we must first know some basic concepts in the matter such as: CFD, BROKER, TOKENS, AND WHAT IS A RISK AND LEVERAGE FINANCIAL PRODUCT.
basic concepts:
CDF:
In finance, a contract for difference (CFD) is a contract between two parties, the buyer and the seller, which stipulates that the seller will pay the buyer the difference between the current value of an underlying asset (stocks, indices, currencies, bonds, among others). If at the time of contract completion the difference is negative, then the buyer will pay the seller.
BROKER:
A stockbroker, brokerage house, broker dealer or stockbroker (stockbroker in English) 1 is a legal or natural person who, upon commission, is authorized to directly advise or carry out investments or securities transactions in the financial and commercial markets.
TOKENS:
A token is "a unit of value that an organization creates to govern its business model and empower its users to interact with its products, while facilitating the distribution and sharing of benefits among all its shareholders." This is how William Mougayar, author of the book ‘The business blockchain’, defines the new term for the digital economy.
WHAT IS A RISK FINANCIAL PRODUCT:
are those in which prices can move quickly against you and it is possible to lose all capital.
I made the concept based on what I read.
LEVERAGE:
Leverage is the relationship between credit and equity invested in a financial operation. The higher the credit, the higher the leverage and the lower the equity investment. In other words, leverage is simply using debt to finance a trade. By reducing the initial capital that must be contributed, there is an increase in the profitability obtained. The increase in leverage also increases the risks of the operation, since it causes less flexibility or greater exposure to insolvency or inability to meet payments.
What is a cryptocurrency CFD?
The CRYPTOS CFD is vulgarly a common bet in which we decide to bet, regardless of the redundancy with a broker, to the increase in price or, to the fall in the price of a specific coin or token, as it is a bet we will never have the ownership document Likewise, in a few words the cryptos or stocks will never belong to us, our goal will be to deduct when this value will increase or decrease in order to trade, I can buy a CFD of the ADA token for example, with a leverage of 5% and bet on The low, I am practically assuming that at the closing date of the contract the value of the ADA will fall and I will win.
although as the saying goes, "In betting, the house always wins."
1:20 in relation to it is 5%, this means that for every dollar that I invest out of my pocket, I am allowed to work with 20 dollars on loan.
In the following graph I will try to demonstrate how the cfd works, betting on the high.
figure 1:
Let's say I buy my CFD on the crypto ADA, with $ 200 at 1:20 (5% leverage) and the coin goes up by 10%.
we are working with $ 200.
our profit will be 5 times the percentage of the total increase, that is:
figure 2:
How do I know if cryptocurrency CFDs are right for my trading strategy?
First, we must be sure how we want to operate, that is, be very clear about what we are going to do with our money, if we only want to buy and sell or go beyond that!
If we are newbies and we have little money, it is not advisable to invest in CFD's. It is a double-edged sword, because we can lose all our money in the blink of an eye, we can also win, but it is very unlikely, and therefore it would be a bad strategy because we would be undercapitalized.
as a university professor said:
"The market is not designed so that as operators we win"
Are CFDs risky financial products?
Yes totally, CFDs are very risky because there tends to be a conflict of interest between the parties: This means that, while I am betting to win, the broker is betting everything that I lose, or vice versa! Always in this type of changes it is more beneficial for the broker although it is not ruled out that we could generate dividends since as it is understood it is a bet.
It is said that 99% of new traders who invest in CFDs, in their first year, lose everything! said here >>>>>>
Do all brokers offer cryptocurrency CFDs?
Not all brokers allow it, currently there are CRYPTOBROKERS, and there are endless of them, in which we can operate in demo mode to learn and in real mode, to enter the market to run as such!
Explain how you can trade crypto CFDs on one of the brokers (using a demo account).
I will do the demonstration
Visit https://www.etoro.com/ link suggested by professor @kouba01
END...
Cc:
Hello @g0h4mroot,
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 6/10 rating, according to the following scale:
My review :
Acceptable content in which you have answered the questions posed in a way specific to you that lacks a bit of analysis and criticism. I didn't like the way the definitions were worded mentioning the source, you had to summarize it in paragraphs and present it.
Thanks again for your effort, and we look forward to reading your next work.
Sincerely,@kouba01