Steemit Crypto Academy Season 2: Week 2 |Homework Task (Cryptocurrency Contracts For Difference (CFDs) Trading ) by @pilatejnr
Hi Steemians,
I am so delighted to do my first assignment in this esteemed community. I joined Steemit, hoping to learn more about cryptocurrencies, and very happy for such assignments and lectures from our lecturers which is broadening our knowledge in this trillion-dollar crypto-trading industry. I am very thanking to @kouba01 for his detailed and educative lecture which has helped me to gain more knowledge in crypto-trading.
Cryptocurrencies are the future of trading. As the world is moving to an age of technological advancement, every part of our lives is going to digitalized so it is in the best interest of everyone to be abreast with digital trading which is the crypto-market. There are many different ways of conducting trading with crypto-currencies but I will share with you today what CFDs are all about.
CFD is an acronym for Contract for Difference. It is defined as a type of crypto-trading where there is a contract between an investor and a CFD broker to exchange the difference in the value of a cryptocurrency without the investor having a cryptocurrency in his/her wallet. In this trading, the investor would bet on the price of the underlying asset which a cryptocurrency rising or reducing within a specific time in the contract. The trading is carried out on only the current price of the cryptocurrency in comparison to a time in the short or long future but not on the value of the cryptocurrency. Since cryptocurrencies are volatile meaning their price can change(rise or reduce) at any time, so the CFD makes it available to either bet on the price of the asset(cryptocurrency) increasing or decreasing as it is a two-way trade.
As a two-way trading system, the investor can make a profit either by buying(long position) or selling(short position). The investor would buy if he/she believes that there would be a rise in the price of the asset and will earn a huge profit if his/her speculation comes to pass and if the speculation fails then the investor would incur a loss. In the same way, he/she would sell if he/she speculates that the price will fall so that after the price has decrease he/she would purchase it back. Therefore the investor must know the right time to make a purchase or sale, so he/she can make a profit both ways.
As the world of the crypto-market is always in locomotion, investors and traders are finding new ways to trade their crypto-tokens to make huge profits. For one to know if CFDs are worthy of one's trading strategy, the following should be considered;
- Cryptocurrencies are very violate and care must be taken when investing your income as losses and profits can turn up swiftly.
- Cryptocurrencies are quite expensive and risky as said earlier, so one is advised to buy with risk-free capital(capital in savings or not used) since there is a possibility of losing it all.
- CFDs are better when your trading strategy in the short run.
- One must have at least a little knowledge of margin and leveraged trading to operate freely in CFD trading.
- CFDs trading are very suitable since you can trade without even holding a crypto token or coin
- CFDs trading is suitable for everyone since you can invest with your income and earn a huge profit on marginal and small(even negligible) changes in prices.
- CFDs also provide a comfortable trading environment through regulated brokers who control the CFDs market.
Yep, CFDs are very risky financial products due to the volatile nature of the crypto-market. In CFDs trading, every step on your way is risky so if an investor makes predictions on prices of the asset and the market prices moves in opposite to one's predictions, huge losses will be made due to leverage and margin trading associated with CFDs but the vice versa of this situation on the investor side will lead to huge profits. Even in any type of trading, risk is attached to it so it depends on you (the investor) to be bold and take risks inorder to obtain profits but must have in depth knowledge about the trading before partaking and with CFDs, knowledge on margin and leverage trading must be understood vividly since CFDs involves huge capital in its operation.
No. It is just a hand full of brokers deals in CFDs since the 20% of every society(the rich) is likely to do trading in CFDs. Most trading or exchanges carried out in the crypto-market are done with no third parties or mediators since most of these mediators even benefit at your loss. Some of the best world recognised CFD brokers are as follows;
- eToro
- TMGM
- BD Swiss
- Tickmill
- GO Market
The following simple steps shows how to create an account and start trading with cryptocurrency CFDs using the eToro broker;
- Step 1
You open the official website for eToro broker link. Then you click on the sign up for free.
- Step 2
You then fill your details, accept their terms and conditions, and their privacy and cookie policies to create an account on their platform.
- Step 3
When your account is opened, a watchlist will appear then you click the triple short bars on the top-left corner and complete your profile. Then you click on the real in the pop-up menu and change it to virtual portfolio.
- Step 4
You then click on Deposit Funds and you fill your details of your visa/debit card and input the amount to deposit then click deposit to put your income into your account.
- Step 5
You go to the Trade markets and then select Bitcoin in the crypto-coin section and begin your CFD trading.
- Step 6
Lastly enter your desired amount then you chose either buy or sell. And you click on the Open trade to compete the transaction.
Cryptocurrency CFDs are very popular due to the comfortable environment it gives its investors in the short run but care must be taken when trading in CFDs due to the high volatile nature of cryptocurrencies and the risks involved in it.
As an economist, I would like to advice my fellow Steemians to not involve themselves in such trades but rather diverse in trade with lower risks in the crypto-market. As an entrepreneur too, risks are part of our lives and inorder to make it to the big leagues, such investment must be considered but one must carefully understand the dangers that comes with it so that one will not be surprised at the end.
Thanks, for your time and attention.
Hello @pilatejnr,
Thank you for participating in the 2nd Week Crypto Course in its second season and for your efforts to complete the suggested tasks, you deserve a 6/10 rating, according to the following scale:
My review :
Generally acceptable work. Your answer to the first two questions was not straightforward, which made the article lose its purpose. You also lack the analysis of some ideas in a smooth way.
Thanks again for your effort, and we look forward to reading your next work.
Sincerely,@kouba01
Thanks for the review @kouba01. Hope to improve in my subsequent assignments.