Today I will be writing about the CRYPTOCURRENCY CFDs according to the homework task by professor @kouba01

What are Cryptocurrency CFDs?

CFDs is an acronym for contract for difference; Cryptocurrency CFDs trading​​ allow a person to speculate on the rising or falling prices of a cryptocurrency. Trading CFDs means that a person can either make a profit or loss, which all depends on which direction he chooses for a cryptocurrencys price to move which also depends on the direction in which the market moves.

With cryptocurrency CFDs trading, a person needs not to purchase or sell the underlying asset ( like the Cryptocurrency); what he does is to purchase or sell a number of units for a particular cryptocurrency for example; Bitcoin, Ether, just to mention but a few, depending on whether he thinks the prices will go up or depreciate. For every point the price of a cryptocurrency moves in his favor, he gains more than the number of CFD units he has bought or sold. However, for every point the price moves in opposite direction to which a person has predicted, then that's a loss for him.

For instance, if a person predicts that the price of a cryptocurrency will go up, he can buy a CFD and benefit from the rise, this is known as GOING LONG, comparatively, a person can predict that the price of a cryptocurrency will go down, he can sell a CFD and profit from the, this is referred to as GOING SHORT. However, if his predictions are not accurate, he may lose all his money.

Furthermore, contracts for difference (CFDs) is a leveraged product, what does this mean? This means that they are derivative tools that worth more on the market than an investor originally place. It can also be referred to as a financial instrument that allows a person to make and take a position that worth more on the market than his original lay out. When trading with leverage on cryptocurrencies, an investor places a bet by using a reasonably small margin on which way his chosen cryptocurrency will move. He technically does not own any amount of such asset (cryptocurrency) but whether he loses or he gains it will correlate with the performance (s) of the market.

HOW DO I KNOW IF CRYPTOCURRENCY CFDs ARE SUITABLE FOR MY TRADING STRATEGY?

First and foremost, a person who wishes who to trade using the cryptocurrency CFDs should have a plan, be disciplined and makes sure he practices so well.
Timing is very important; lets say for example, if a currencys value has been on the decline and a person identifies a point where he believes its near the end of trend; then he can enter a buy position where he anticipates for the trend to turn in the other position.

Comparatively, he can follow the same procedure if the price is rising by shortening the currency that has been increasing in price when he thinks a sharp change is impending.

Are CFDs risky financial products?

Yes, they are very risky and they may not be suitable for everyone who wants to invest.

Any product that involves the financial markets CONTRACT FOR DIFFERENCES (CFDs) are instinctively risky. CFDs trading are leveraged in such a way that it may and can lead to greater profits with a little deposit. It is also very important to note that a person can lose more than what he deposits if the market goes against him. More so, Stop losses are not always guaranteed due to market gapping or slippage.

Generally, everyone knows that whatever he puts his money into should meet his investment goal which is to make a maximum profit as possible and so, CFDs by nature being a leverage product involves a lot of risk and so, are not suitable for everyone because; no one can be sure to say that a financial product will go as he wants it to, a person can lose all his money and even more than he puts if probably something goes wrong in the market.

A person trading with CFDs should be ready for anything that comes out of the market; for that reason, a person should never trade with monies he cannot afford to lose because CFDs trading carries a lot of risks.

DO ALL BROKERS OFFER CRYPTOCURRENCY CFDs?

NO, why? Because, there are different types of brokers and each of the brokers has its own specification.

HOW TO TRADE WITH CRYPTOCURRENCY CFDs ON ONE OF THE BROKERS (USING A DEMO ACCOUNT).

A demo account is a kind of acct that provides a person with the opportunity to try trading platforms with a reduced risk. Most live platform features are also featured in the demo account.

You see, the cryptocurrencies market has grown in popularity over the years among the people of the world; with this development, a wide range of opportunities has been created for whoever wants to speculate or predict on their market prices. But before a person jumps in to it, there are some important things he needs to know and learn before he can trade cryptocurrency productively. Some steps to follow for a beginner includes;

A person who wishes to trade must as a matter of fact learn how CFDs work.

Using Etoro App as a case study;

These are the screenshot below

Download the mobile application of the broker ( Etoro-trading platform).

Register using your name, e-mail, phone number as well as your country of residence.

A verification code may be sent to your e-mail so as to ascertain the authenticity of your e-mail.

Log in your account.

Choose the asset (cryptocurrency) you want to trade.

Enter the trade menu

Enter the number of units you want to purchase or sell

Start trading.