Steemit Crypto Academy Week 10- Homework Post for @kouba01 | by @mandate

Hello dear friend on steemit, I am here again to make a post about one of our dear professor we have on steemit which is professor @kouba01 so I will be answering the homework task below

What is a cryptocurrency CFD?

Cryptocurrency cfd is a scheme or method used by traders to trade and invest in cryptocurrency assets by agreeing to a contract between themselves and a broker ( a platform either a person or company that helps traders to purchase assets from security exchanges. They are the middlemen between investors and exchange platforms).

The contract allows for the investor to invest and pay through the brokers who after each successful trading takes a certain percentage from the investor whether there is profit or loss.

How does Contract for difference works

The brokers provide available assets which can be traded on to the investors. The investor then chooses one among the available assets and set his position for such asset by putting in the amount to buy or sell, when the profit should be taken, etc.

The broker and the investor then agree to the contract, the broker must have told the investor how much percentage they will take from the investment. After an agreement is reached the position is then opened until either a profit is taken or a loss occurs.

There are some CFDs that provides a chance for one to copy another person's trade and follow in the step of the person, this usually isn't very advisable but it is always a saving grace most times especially for new traders.

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

To know if cryptocurrency CFDs are suitable for your trading strategy, you need to put some things into consideration which are below:

1. You need to have a trading strategy/ plan in mind: one need to have mind of his or her own when it comes to trading, the amount of leverage to set and the kind of trade one will be going into. If this is done then

1. sort out brokers who offers the same trading strategy as yours, or search for CFDs that has the same trading strategy as yours. For example, there are various trading strategy depending on the investor, we have the day trading which is further splitted into trend trading, swing trading and so on.

Let's take for example that investor A trading strategy is trend trading what investor A will do is to look out for brokers who does trend trading and tap into their platform to perform his or her trading. Reading the information about the CFDs will make you know if they offer same trading strategy as yours.

1. Research your position: alot of people don't usually do research on their position most especially the new traders, they just jump on trades as it comes to their minds. Researching ones position makes one to know how high the risk in the position is and how much profit the person is to expect.

2. Comparison of Different CFDs brokers: it is advisable to compare different brokers to know the one whose contract is more appealing or more pleasing for your trading strategy.

Are CFDs risky financial products?

There are no business without risk or no financial products without risks, so there are risks associated with CFDs. Some of the risks involved are listed below.

1. The CFDs will take commissions which might be very high after every transaction regardless of whether there is a gain for the investor or there is a loss.

2. As much as one could get alot of profit once could also lose alot of money or more than the capital placed on a trade. This is one reason why it is advisable to trade with money one can afford to lose because of the risk associated with trading.

Do all brokers offer cryptocurrency CFDs?

Not all brokers offers cryptocurrency CFDs, there are some brokers who are into other assets like shares, indices, cryptocurrency and forex.

There are some brokers who offers all the above assets and there are some who don't offer all of the assets. Examples of brokers are coinbase, crypto,com, iq options, gemini etc.

How to trade with cryptocurrency CFDs on one of the brokers (Using a demo account).

First and foremost we need to get the broker we will be using for the traidng. In this article we will be making use of IQ options. We first need to download the app after which we register and verify your account.

If it's a real account you will need to deposit some money into the account either by card or using a cryptocurrency. We will be using a demo account for now, we will be trading on cryptocurrency CFDs. After the homepage must have load, you click the options and go with whichever trading you want to do.

The homepage, the button which the arrow is facing is clicked to access different options

Looking for the options that you prefer. For this article like I have said. Crypto is clicked then Ethereum is selected

Setting a position for the trade

Position created and waiting to be executed

Let's take cryptocurrency for example, after clicking cryptocurrency, you choose the one you wish to trade on. I selected etheruem which current value was at $2315. I then set my position by choosing to buy the etheruem when its value is at $2300, I placed my stop loss at $2250 and my take profit at $2405.

This means that whenever the price of etheruem gets to $2300 the broker will help me to purchase it which will open the trade, once the price gets to $2250 the broker will help me sell the Ethereum so I won't incur much lost and when the price gets to $2405 the broker helps me take profit. Whichever one that comes first is what the broker will activate.

This type of trading is a long trading it might take days before the position hits target.
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Best regards

@kouba01

Written by @mandate

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THANK YOU!