Crypto Academy Week 10|| Home Post For [@kouba01]- Crypto Currency Contract For Difference

Good day to the Steemit community. I am overwhelmed to be part of the Steemit crypto academy community. My appreciation to professor @kouba01 for the comprehensive lecture on the Crypto currency Contract For Difference (CFDs) lecture. It is through the lecture that I got a clear understanding of the CFDs, the risks involved and what to do in order not to be at risk. This article is my presentation of the tasks assigned by professor @kouba01 after the lecture. My reference point is the lecture notes provided after the lecture. All other reference points are clearly sourced within the article.
Let's get started

What are Cryptocurrency CFDs?

First of all, cryptocurrency is digital money. It can be used for the purchase of goods and services virtually with strong cryptography for secured transactions.
CFDs stands for contract for difference and crypto currency CFDs act as a contract between a trader and a crypto currency exchange company. In real sense, the trader does not claim complete ownership of the Crypto currency. It is based on predicting whether the value of the Crypto will rise or fall, therefore choosing the appropriate CFD type. There is a loss if the trader makes a wrong prediction and a gain if he/she makes the right prediction. In CFDs, buyers can delibrate price of the Crypto currency without holding the Crypto currency itself. They are permitted to set take profit and stop loss levels, which are referred to as (take profit and stop loss levels).Having knowledge of trading CFDs before venturing into it with your business strategy is important as it involves risks due to the volatile nature of prices.

Source

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

It is a clear fact that, prices of the crypto currencies are volatile, therefore, to trade in the CFDs, I have already made sure these are considered

Investment in crypto knowledge: it will be very difficult to survive in CFD trading without strong knowledge of the Crypto market. Therefore, before I get involved in trading the crypto currency CFDs, I will make sure I acquire knowledge of how the graphs and charts work, the different CFD trading tools and many other important aspects of the CFDs to avoid massive losses. Therefore, to know if a Crypto currency CFD is good for my trending greatly depends on my knowledge of it.

Knowing how to manage risk:
This is an important aspect investors should pay attention to, in order to determine if the CFDs are suitable for them. Taking risks based on risk tolerance will prevent investors from huge losses. For me to be involved in crypto CFD trading, I have considered the risks involved and how to overcome or reduce them.

Knowing the use of the demo account. Through the use of the demo account, investors can gain experience in the trading field. As there are no risks, the cost of using the demo account is free and the results are completely real. One can gain experience in trading with CFDs through the demo account and it is one of the factors I'll consider before trading in crypto currency CFDs.
Starting small, then expanding the trading over time,
adding losing trades to my trading strategy.

With these points above into consideration, I can decide whether the Crypto currency CFDs are suitable for my trading strategy.

Are Crypro Currency CFDs risky financial products?

As CFDs involve highly volatile assets, there are some risks involved, but that does not mean they have positive effects. There are advantages and disadvantages to trading CFDs which I have added in the latter part of this section.

These are some of the risks involved in trading CFDs

The volatile nature of prices of the crypto currencies makes CFDs a risky business.
The charges, charges and funding involved
Leverages: these increase the traders' losses and profits. Therefore, they can have a great impact on fees as some companies offer about 50:1 leverage
Price transparency: one may not access the complete price for the involved Crypto currency when trading. This makes it very risky.

Advantages of CFDs

CFDs offer easy account opening
There is no fixed expiry date, so traders can trade at any timeframe
Interests are received in short comings
With CFDs, one can trade in the international market with a single account.
The transaction costs are low in CFDs

Disadvantages of CFDs

Risks are involved in trading CFDs
The leverage levels are not flexible.
A CFD investor can not claim the right as a shareholder because he or she does not own the assets physically. investor has
to pay interest on his/her total transaction.
Investors are only limited to dealing with the CFD brokers. Their accounts are opened with

Do all brokers offer crypto, currency CFDs?

It's not all brokers that offer CFDs because, some of the transactions in the Crypto currency can be made without any agent or negotiater, this makes it possible to do transactions without the CFDs.
These are some of the top brokers offering the Crypto currency CFDs.
XTB
City Index
eToro
CMC Markets
eToro

How to trade a Crypto currency CFD using a demo account in eToro

Step 1. I created an account in eToro
Step 2. I opened a virtual account for the demo account because it's through the virtual mode I can trade using the demo account

Step 3. I went to market trades, then chose ethereum under the Crypto currency as the market to trade on

Step 4. I then entered the desired amount, thus 5000 then clicked on the open Trade
The demonstrations are shown in the pictures below:

From the demonstrations above, I opened a trade by buying 2.7 units of Ethereum at $5000

Conclusion

Crypto currency CFDs offers an opportunity to bid with the prices, good care must be taken before venturing into it with your business plan as it is a win or lose senario. It is also important to acquire much knowledge on how it really works by practicing through the demo account for investors who may develop interest in using it.

Thank You For Reading

Screenshots Source

cc:
@kouba01