Steemit Crypto Academy Season 2, Week 2 Homework Post For [@kouba01] || Cryptocurrency Contracts For Difference (CFDs) Trading
Hello, @everyone I hope you will be fine and enjoying good health. First of all, I want to congratulate professor @kouba01 for his first lecture and it is really a matter of pride for me that I have attended his wonderful lecture. I was completely unaware of the Cryptocurrency Contracts For Difference (CFDs) Trading. But now I can say that I am aware of this as I have learned a lot of things from his lecture. If you have not yet attended the lecture then do not waste your time and attend the lecture and learn about crypto trading.
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As we know that this is the era of Cryptocurrency and everyone is talking about cryptocurrency and want to earn money from cryptocurrency. Now it has become common that everyone in the world and door to door is talking about earning profit from crypto. And the most amazing way to earn from crypto is to invest in the crypto. But most of the experienced persons are investing in crypto and trading with crypto and making huge profits. But it is only possible if you are experienced and a good forecaster otherwise you can lose your all investment in the trading.
There are different strategies in trading and modes such as; spot trading, cross trading, margin trading...etc. Similarly, CFDs are also a trading term and a way of trading to get profit but it is not guaranteed that you will win all the time but you can also lose your money. So let's start learning about the CFDs.
What is a cryptocurrency CFD?
The term CFD is a special term that is used in crypto trading which stands for the Contracts For Difference. Contracts For Differences is a kind and method of derivative trading, which allows the users to invest and trade their investment by engaging with the market along with the price fluctuation of the specified assets, on which they want to trade. It is basically a contract between the investor and an investment bak and it is usually done by the stable coins which always remain at the price of $1. But brokers also provide these contracts in other cryptocurrencies such as BTC, ETH, LTC ..etc.
This trade is contract-based and this is often offered by the brokers (a person who buys and sells assets for investors). CFD is a leverage trading means to say that you do not have a need to invest money equal to the complete contract but you can start it just by investing a portion of your trading contract.
But you have to be very careful that as you get profit multiplied by the price increase but similarly if the price decreases then you have to accept equal loss multiplied by the down price.
The investors and the brokers become agreed with each other along with the price fluctuation of the market. And the investors have to predict the price of the specific asset which they want to trade. They predict the price according to their views that whether the price will go up or go down.
There may be two possible conditions in CFD trading:
If an investor predicts that the price of the selected coin will go up then if as a result, the price of that coin goes up then the broker has to pay the investor because he has won.
But if an investor predicts the price of the coin will go up but unfortunately the price goes down then you have lost your money and that will be paid to the broker.
So careful forecasting is necessary for the trading, to get the experience of trading you should build your demo account first and you should practice first before diving into the real account for the trading.
How do I know if cryptocurrency CFDs are suitable for my trading strategy?
As everyone has his own strategy in all the fields similarly everyone has his own suitable trading strategies. Basically, everyone has his own unique qualities which others lack. It depends upon your abilities and management of the risk and the investment.
In the cryptocurrency difference contract, it is easy to buy and sell with the leverage opportunity. As there is only a need to invest a small portion of the total contract amount. So if I do not have much money for spot trading or to buy a cryptocurrency completely and to hold it, then CFD is very helpful and the best strategy for the trading by investing a small portion of it.
Suppose I am a person who wants to make money quickly and want to earn huge profits with a small investment then CFD is the best choice for me and this trading g strategy will be very useful for me to get huge profit. By using this strategy I can get a profit of about 10x, 20x according to the set units. But careful management and experience are also required for this.
Suppose I am a good forecaster and can predict the upcoming prices of the crypto coins then I have a wonderful chance to get large profits by using CFD trading. So in this way CFDs trading strategies are useful for me because I can predict the price in the right way and can earn a lot of profit.
In CFD trading, the long and short terms are also very important and mat proves to obtain huge profits. When we see that the cryptocurrency is going down and following a downtrend we can open short term in short periods. It is known as Scalping that we make profit from the small price fluctuations. Similarly, when we see that price is rising and cryptocurrency is following an uptrend then we can open long term for the huge profit. So this CFD trading strategy of Long Term and Short Term may be very suitable.
According to my views and opinions, If is there anyone who is fear of hacking or any other stealing or cheating then CFD trading may be very suitable for him. CFD is a contract-based trading system and these contracts are affiliated with different trusted platforms. So if any problem occurs then you are free to complain and if you are right and your thinking is supporting you correctly then your problem will be resolved as soon as possible.
Are CFDs risky financial products?
It is a common example of our lives that everything has advantages and risks as well. Because every picture has two sides as far as CFDs have advantages but they are very risky as well.
As we know that we can make a lot of profit multiple times of our investment with the increase or decrease in the price according to our interest. But there is also another side that if the market opposes our strategy then we have to bear a loss of multiple time of our investment. So there is a huge profit but a lot of loss is also possible.
As we borrow crypto in the CFD so we have to pay for it and in some cases, it may be possible that we borrow crypto for the long term and we get profit but the borrow duty exceeds your profit. In this way, besides getting profit we have to pay the borrow duty and we are in loss.
In spot trading, the quantity of our assets remains the same but the value can be changed, by holding them we can definitely make a profit. But in CFD trading there is no single guarantee for the profit because we have to set all of our money for the bet. It is our luck whether we win the bet of the market or lose. So CFD trading is very risky.
So we can conclude that CFDs are very risky products so If you are going to consider CFDs then you should be an experienced person and the best forecaster to become successful in CFD trading. Otherwise, you will lose all of your investment without knowing anything because of the sharp fluctuation of the market prices.
Do all brokers offer cryptocurrency CFDs?
As we know that CFD trading is mostly carried out by stable coins but the brokers offer other cryptocurrencies as well for CFD trading purposes.
But there is also a limitation that all the brokers do not offer CFD trading because the brokers only offer those cryptocurrencies for the CFD which are already ranked and well known. So whenever a cryptocurrency becomes rich and becomes well known then the brokers try to offer CFD for that Cryptocurrency.
There are some brokers which give CFD trading opportunities to the investors and the traders. Some of them are given below:
| Sr No. | Broker | CFD fee score | CFD product selection score |
|---|---|---|---|
| #1 | CMC Markets | 3.3 | 5.0 |
| #2 | ActivTrades | 4.7 | 3.7 |
| #3 | Spreadex | 3.8 | 5.0 |
| #4 | AvaTrade | 4.5 | 3.7 |
| #5 | IG | 3.0 | 5.0 |
Explain how you can trade with cryptocurrency CFDs on one of the brokers (Using a demo account)
As I am Pakistani so I will try this with one of the brokers which is working here in Pakistan as etoro is inactive in Pakistan ad there are other brokers which are live in Pakistan. Some of them are given below:
- IC Markets
- AvaTrade
- Roboforex
- FP Markets
- Pepperstone
- easyMarkets
- PrimeXBT
I am going to do a trade with cryptocurrency CFD by using PrimeXBT.
I am not going to share all the steps because the post will become very complex so now i have created my account on the PrimeXBT and after giving them some necessary information they have allowed me to use their demo account service.
So I have done a trade that BTC will go up with a large amount of about 0.01 BTC. So when I click that it will go up then they give me this notification to overview the trade and to confirm the trade before proceeding. So I confirmed the trade and then the trade started with the duration of 10 mins.
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In real-time, my trade is in loss but when it will cross the limit and will go up then I will take profit from this first CFD trade.
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In this way and by following this procedure anyone can place a trade and get profit by careful management and forecasting, but right now I am at loss.
It is the result of my first trade that I have lost but I did not lose hope and I again did a trade and then I was happy that I had won and the limit reached as I set, a screenshot of my winning trade is given below.
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| Lost Trade | Won Trade |
Conclusion
In conclusion, I will say that if you are looking for more profit by investing a small amount then you can consider CFD trading but there is also a risk of losing all the investment. Because proper consideration and forecasting are required to be successful in CFD trading, otherwise you may lose all of your investment. And if you are new to the trading then I will recommend you to start with a demo account to get the experience of trading and the market. You should learn about technical analysis to make huge profits from trading. Because all the trading game depends upon technical analysis.
Cc:- @kouba01
[All the screenshots are taken from the primexbt]
Hi @mohammadfaisal
Thanks for your participation in the Steemit Crypto Academy
Feedback
Good work. Well done with your research on Cryptocurrency CFD trading
Homework task
8
Thank You professor for checking my homework.
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