Homework task season 2 week 2 by professor @kouba01 CFDs trading

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What is a cryptocurrency CFD?

The word contract caught my interest from CFD trading which means for such trading to take place between two parties there must be a mutual agreement between these two parties agreeing to the trading terms and conditions.

So in essence a trader will have to agree to the stipulated rules and regulations governing a CFD platform before starting trading in such a platform also the broker who provides the contract trading asset will have to abide by the set-out rules governing the trading platform.

CFD trading which stands for "contract for difference" is a trading method that involves traders or investors investing in assets/commodities by engaging in a contract/agreement with a trading platform broker.

In the cryptocurrency world, CFDs trading has been a trending investment strategy for investors to involve in buying crypto-assets such as Bitcoin, ethereum, and other crypto.
In this type of trading, an investor/trader must not necessarily own an asset like Bitcoin before they can trade it on the platform with their dollar account they can participate in trading in CFDs trading.
This type of trading involves a trader opening a position of buy/sell long/short term position when the price of a predicted asset go up the trader is at a gaining position while If the asset is going down the trader is at losing side the size or amount used for funding an account can determine the size of leverage a trader can choose for trading.

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

One important factor to consider before entering any investment venture is by evaluating the risk involved in such an investment.

Considering CFDs trading the risk involved are very high for a newbie trying to understand how trading cryptocurrency works will need to have a proper understanding of the trading principle.

To know if CFD is suitable for my trading strategy here are some things I need to look out for.

1. Develop trading skills; before starting I need to seek expert training either from online course videos or read articles related to CFDs trading.

2. Make basic research; before starting CFD trading I will make research about terms and conditions governing CFDs trading

3. Evaluate risk; to start CFD trading I need capital and it's always advisable to invest or trade with spare capital as I need to measure if I can be able to tolerate the risk of losing capital since trading involves high risk.

Balancing the above factors if after making research and practicing with a demo account came off with positive results I will consider starting trading with a real account using CFDs.

Are CFDs risky financial products?

Very well CFDs are very risky, the crypto market is filled with uncertainty which makes it highly volatile for trading.
making any wrong moves on any open position in CFDs trading can lead to loss of all funds.

Do all brokers offer cryptocurrency CFDs?

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Above is a screenshot of some exchanges offering crypto CFDs trading.

There are multiple exchanges available in the market, not all the exchanges offer CFDs trading currently.
If any trader is interested in CFDs trading he/she will need to search for exchange in the market to register and start trading.

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

I will be creating an eToro trading account.

Accessing the website I navigate the create account where I input my preferred user name and email and password.

An email was sent welcoming to the exchange platform.

On successful login, I will be creating a virtual portfolio to trade using a demo account.

I will be opening a position to buy BTC at $5500 using 0.1 unit which is 5.50% of my trading equity.

I will then wait for my position to be filled either it goes up or down.

Conclusion
Trading involves risk which is why any investor needs to make adequate research learn using a demo account before starting any trading activities.

With the little idea, I have on crypto trading CFDs can be an additional lucrative source of earning more income.

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