Crypto Academy Week 10: Home Post For @kouba01: Crypto Currency Contract For Difference: by @hydra1

Greetings everyone here
I’m glad to take part in Steemit Crypto Academy Season 2 , we are in now in the 10th Week of Steemit Crypto Academy, It begun with exciting lecture from professor @kouba01 . I’m grateful to be part of this session, thanks to Professor @kouba01.

What are cryptocurrency CFDs?

Before I will delve into the subject matter, I will like to explain what what cryptocurrency is.
Basically cryptocurrency is a digital currency that can be used to purchase goods and services virtually over the internet. There are so many cryptocurrencies in circulation and of them includes; bitcoin, ethereum, doge coin, stellar, ripple, monero and so many more.
CFDs on the other hand stands for Contract For Difference which acts as a contract between an investor (trader) and a crypto exchange platforms.
Before an investor trades in cryotocurrency CFDs, the investor does not own the crypto asset and only trades on the price of the crypto assets. In CFDs, there two terms used which are Purchase or "Long Position" and Sell or "Short Position" .
In the "Long Position", a trader after doing all his price forecasting analysis expects prices of his desired asset to rise in future, so he/she buys/holds a position that CFDs trade to make huge profits in the long run.
In the "Short Position", an investor sells his/her assets based on analysis made that the price of the assets will decrease in price so therefore sells and makes profits and buys later on when the assets decrease. In CFD trading, a trader may profit from both the up and down movements of the asset. Traders will profit from price change in both ways, whether it increases or decreases.
A trader receives money for every point the asset moves in the direction he has set in his trade, which is multiplied by the number of units he bought or sold. The loss would be measured in the same way if the market moves in the opposite direction.

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

As we know that cryptocurrencies are volatile, one has to take into account the following before trading in the cryptocurrency CFDs.

• Knowledge of the crypto market: It is generally assumed that before one engages in something, one has to have knowledge about it and as the sayings goes "knowledge is power". Before one gets involved in the cryptocurrency CFDs, one has to have a thorough knowledge about it right from the crypto charts and graphs, the tools needed to aid one sail through successfully.
• Practicing With Virtual Account: As the saying goes "practice makes man perfect", before a trader engages in cryptocurrency CFDs trade, there is there the need to practice the knowledge acquired. In practice, one gains experience in trading with CFD through demo accounts. If one is able to see success based on the analysis practiced, one can consider to trade in real account with calculated risks.
• Risk Management: Risk management is one of the essential factors one has to consider before trading in cryptocurrency CFDs. Trading calculated risk based on risk tolerance would protect traders from significant losses. Cryptocurrency CFDs in its nature is risky and its not meant for everyone, one has to risk what he/she can afford to loss.

Are CFDs Risky Financial Products?

Yes, CFDs are risky financial products. This Is due to the fact that cryptocurrencies are volatile that is the move down and up, short and long at any given moment.
As the movement is not certain, if a trader does not do his/her price forecasting well, he/she stands to loss huge sums of his/her investments and likewise if he/she does the predictions well and goes according to plan, the risk involved would be paid off with profit. Most trading websites states boldly on their sites that trading is risky. To me I say trading is not for the faint hearted, if you know you can not bare the risk involved do not venture into it and if you think you can risk, risk with what you can afford to loss.

Do all brokers offer crypto currency CFDs?

Not all brokers offer cryptocurrency CFDs, its just a hand full of them that offer Cryptocurrency CFDs to investors. The list below are brokers that offer Cryptocurrency CFDs.

• eToro
• PrimeXBT
• BitMex
• XBTFx
• TIOmarkets
• City Index

How to trade a CryptoCurrency CFDs using demo account in eToro.

• I opened an account with eToro

• As it is a demo account, I choose the virtual option on from the menu button.

• I went on to click on the "Trade market" on the menu bar, which took me to the various trades

• From the trade markets, I went onto to look for the crypto coins markets.

• I chose Litcoin as my preferred coin to trade

• I entered my trade amount of 5000 which gave me 18 units and then click on open trade
  

From the demo above, I have made a bid of $4907.80 at -1.84% with amount of $5000.

Conclusion

CFDs create's creates the platform for investors to make bid with elastic prices of the digital currencies. Care must be taken in dealing with CFDs due to the volatile nature of the prices and their risks involved.

cc:
@kouba01

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