Crypto Academy Week 10: Homework Post for Crypto professor @kouba01 | Cryptocurrency Contracts For Difference (CFDs) Trading
Hello, Steemians. It’s that precious time to learn at the academy again. I read the lecture of professor @kouba01 and it was a wonderful one, this article will be used to attend to the task associated with the lecture.
What is a Cryptocurrency CFD (Contract For Difference)
.jpeg)
Cryptocurrency CFD which has its full meaning as “Cryptocurrency Contract For Difference” is termed as a contract form of investment in the cryptocurrency space which is based on an agreement between the crypto investor and a financial broker. Cryptocurrency CFD can otherwise be termed as crypto investment whereby you don’t necessarily own huge crypto asset but entering a contractwith a broker to trade on an asset of choice as provided by the broker on their platform.
As a crypto investor, you are eligible to enter a cryptocurrency
CFD investment with a broker that offers the service and all you do is positioning
yourself for a buy position or sell position. If your position comes through at the end of
the contract, then you would make profit based on the unit of your asset earlier used
when you opened the position.
Advantages of Cryptocurrency CFD (Contract For Difference)
- Cryptocurrency CFD is very easy to start you are only left to buy a good position.
- Investors don’t have to be in possession in huge crypto asset to invest in Cryptocurrency CFD.
- You have the opportunity to buy a position either long or short (buy or sell).
- An investor can trade on leverage as provided by the financial broker that offers crypto CFD.
- Crypto investors can enter an investment to benefit from the price fluctuations in the crypto market either uptrend or downtrend.
- Huge profit is expected from this type of investment.
How to know if crypto CFD is suitable for my trading strategy
There is a lot to talk about crypto CFD suitability for my
trading strategy and some of them are;
- If I can’t afford huge amount of money to buy large crypto assets to make investment that brings high profit.
- Possessing the trading skills of taking profit when the price movement of assets goes in either direction.
- When I want a secured environment to make crypto investment.
- My willingness to take huge profit from crypto investment and so on.
Are CFDs risky financial products?
With no doubt, CFDs are risky financial products and investors should know that, as much as the profits from these products can be, same as much the losses can be as well. It would be good to consider some of the risks associated with these financial products and I will mention some of the them;
- These financial products often experience price volatility and that can affect investor’s profit.
- Failed initial position opened can lead to an excessive loss.
- Crypto account of an investor can be totally taken over (Liquidation) if his/her loss is greater than the assets owned (We have seen cases whereby the price of crypto assets dropped up to 20% in just a few hours and such is disastrous to an investor that entered a long position in crypto CFD).
- There is no proper regulation in this realm of financial investment.
Do all brokers offer cryptocurrency CFDs?
Cryptocurrency CFDs are not offered by all brokers, we only
have a little of them offering this financial products and some of which are; IG, eToro,
AvaTrade, XTB, City Index and so on.
How to make a Demo Trade of Cryptocurrency CFD on eToro
The process of entering a cryptocurrency CFD investment on eToro starts with visiting the official website of the financial broker, etoro.com/ and click Join Now to create an account.
On the next phase, enter preferred username, an email address and password (having a combination of uppercase and lowercase letters, numbers and characters to make a very strong password). Accept Terms and click the Create account.
The account is created, navigate to switch the account to the virtual one that can be used for Demo account.
Select go to virtual portfolio. I have switched to the Demo/virtual account and that can be seen below.
Go to Trade Markets and select crypto in the trade markets.
You have 18 cryptocurrencies available for Cryptocurrency CFD on eToro, select one and I've chosen Ethereum and entered a buy position. Input the amount you are buying the position with and Open trade.
The above steps completes the process of buying or selling a position using a Demo account on eToro.
Conclusion
Cryptocurrency CFDs expose crypto investors to products that makes a huge profit for them yet the risks associated with this type of crypto investment should be analysed before entering the contract with any broker. This is with no doubt an interesting lecture by professor @kouba01, thanks to you professor.
Hello @temitopef,
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 an 8/10 rating, according to the following scale:
My review :
The content of the article is good, with a clear understanding of the questions and an accurate answer. You could have used another CFD broker platform so that we could share several experiences and benefit everyone.
Thanks again for your effort, and we look forward to reading your next work.
Sincerely,@kouba01
Thanks so much professor @kouba01 for the review, I look forward to learn more from you sir.