Crypto Academy Week 10 - Homework Post for @kouba01

In this home work, i am going to explain some terms.
In the cryptocurrency market, there are a lot of products to invest in.
A cryptocurrency CFD(Contract for Difference) is a financial agreement and this agreement is based on an underlying asset. The underlying asset could be a cryptocurrency or something else. The investor does not need to own the asset but makes profit from the flunctuation in the price of the underlying asset. It is expected that the underlying asset value will either increase or decrease.

Now, how will you know if cryptocurrency CFDs are suitable for your trading strategy? For you to know this, you have to consider some important factors which include:
i. If you enjoy taking risks, then CFDs are suitable for you because they are very risky financial products.
ii. If you find out that buying cryptocurrency is expensive for, then CFDs are good for you because you do not need to buy the underlying asset.
iii. If you want to make high profit margin while investing with a relatively low initial capital, CFDs are suitable for you because you can deposit a small percentage of the total trade value for you to trade on.
iv. If you want to follow an investment target to make quick profit based on small price changes, CFDs are good for you because it is the settlement price between the open trade and closed trade is what the contract pays.
v. If your trading strategy is short term, you have to go for CFDs .
These are some of the factors that can make you know if cryptocurrency CFDs are suitable for your trading strategy.

An important point to note is that cryptocurrency CFDs are very risky financial products and that is why before you engage in the trading, you must equip yourself with knowledge about how the trading works. It is true that CFDs have the potential to give high profit margin, however, they also have the potential to give you much more losses.

Even though you can use cryptocurrency CFD trading for many instruments, the fact remains that not all brokers offer cryptocurrency CFDs. If you want to invest in CFDs, you have to look for the brokers who do trade on them.

Now, how can you trade with cryptocurrency CFDs on one of the brokers using a demo account. A demo account provides you with a safe environment as there are no risks or costs. You can use the etoro demo account.
First log into the etoro official website, then choose CFDs, go to the menu and clicked ''Join Now" option. That takes you to where you have to create an account. Type in your username, email and password, accept the terms and conditions and privacy policy and cookie policy and click 'create account'.

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When you do that, it takes you in and you see the different menu by the left. You click on complete profile and provide all the information there. Then at the right side,you see a drop down box marked real,click on it and select "switch to virtual portfolio", ok it and it goes to that environment.

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It means that you are now on demo environment. Click on "trade market" and then select the cryptocurrency CFD you want to trade on. For this purpose i selected Bitcoin. I opened a trade by buying 0.1 unit of bitcoin worth 5000 dollars to trade with in the virtual account.

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Then you click 'Trade' and enter the amount and click on open trade. You can also set where you don't want your loses to exceed.

In conclusion, i will say that trading on cryptocurrency CFDs is good depending on the type of person you are, your risk aversion and your objectives.

I am grateful to Professor @kouba01