Why trade cryptocurrency CFDs?

The past few years have seen a rise in interest in cryptocurrencies. The result of this demand is that a large number of CFD trading systems and brokers now provide trading in cryptocurrency pairs.

Why, therefore, would a CFD trader want to trade only in cryptocurrencies as opposed to conventional assets?

Trading cryptocurrencies involves no asset ownership, so you can get started with relatively little money and learn how it works without having to cope with the numerous challenges that come with traditional financial assets like stocks and commodities. Some traders also choose the volatile nature of the cryptocurrency market over regular markets since it allows them to potentially profit greatly from leveraged trading. However, it’s crucial to keep in mind that while using leverage, profits as well as losses are increased, requiring in-depth knowledge of risk management.

In this article, we will examine some of the most popular reasons for trading digital currency CFDs.

Cryptocurrency and the crypto market

A cryptocurrency is a form of digital or virtual money that uses cryptography to safeguard and verify transactions. Digital currencies lack a tangible form like cash or coins since they only exist digitally.

Cryptocurrencies are decentralized, in contrast to traditional currencies, which are normally issued and managed by a single authority like the US Federal Reserve System or the ECB.

Bitcoin is the very first digital currency and the most valuable as far as market value is concerned. Since it was invented in 2009 by a person or group using the alias Satoshi Nakamoto, dozens of additional cryptocurrencies have been established.

Similar to other popular financial trading markets like forex, commodities, and equities, cryptocurrencies also have a market. It is made up of several other cryptocurrencies, including Bitcoin, Ethereum, and a lot more, with both buyers and sellers offering goods on opposite sides. The market price of the fundamental asset varies along with the level of interest for each cryptocurrency. Prices constantly fluctuate in the cryptocurrency market because it is available round-the-clock.

The crypto market has been known to be volatile and subject to large fluctuations in prices. This is because of a number of things, such as regulation, supply and demand, market sentiment, advancements in technology, and speculation.

About cryptocurrency trading

Trading cryptocurrencies through CFDs refers to the buying or selling of digital currencies with the intention of profiting from changes in the price of the underlying asset.

Direct digital currency investment is not the same as trading cryptocurrencies with CFDs. For instance, if you placed funds straight in a digital currency, you could only benefit if the price at which you sold it was greater than the price at which you bought it.

Trading cryptocurrency CFDs is making speculations on the value changes of digital currencies without really possessing the asset that is being traded. In this situation, traders and brokers agree to trade the difference in cryptocurrency prices between when they start and end the transaction. As a result, you will not be concerned about other aspects of asset ownership, including security, storage, or access, and can instead generate revenue simply from cryptocurrency price changes.

How digital currency trading works

These trading pairs can consist of a single cryptocurrency, like Bitcoin, and a single fiat currency, such as the US dollar. In this case, the trader earns a profit or makes a loss by speculating on whether the value of the cryptocurrency part of the pair will increase or decrease relative to the fiat currency.

The other type of cryptocurrency pair is composed of two distinct digital assets, such as Bitcoin and Ethereum. By speculating on whether the most popular cryptocurrency in the pair will appreciate or decline in value relative to its cryptocurrency partner, the trader in this instance either earns a profit or a loss.

Trading cryptocurrency CFD pairs operates in a similar manner to trading CFDs on other, more conventional asset classes like commodities, equities, or stock market indices because a trader speculates on the price fluctuations of their selected instrument.

Why trade crypto CFDs?

Trading cryptocurrencies can be more rewarding than conventional financial investing methods for the following reasons:

• Increased volatility: Given how unpredictable the cryptocurrency market is, there’s the potential to make significant gains if you manage your trades well. Be aware that an increased risk of losses might result from significant volatility.

• Easy access: Everyone with a connection to the internet, a computer, or a smartphone and the qualifications to create an account for trading with a CFD broker may engage in crypto trading.

• Round-the-clock trading: Unlike certain markets that close at the end of the trading session until the next day, decentralized cryptocurrency exchanges are open continuously.

• Low costs: Compared to traditional financial markets, cryptocurrency transaction fees tend to be lower.

• Decentralized operations: Since there is no one entity in charge of the cryptocurrency market, it is decentralized.

• Safety: Because they depend on blockchain technology, cryptocurrencies are inherently secure and fraud-resistant.

• Variety: Including cryptocurrencies in a portfolio of current investments can increase diversified portfolios, which can be a useful tool for reducing risk.

Also, since CFDs do not have an expiration date, you are free to place yourself in the market whenever you want to purchase or sell. You can also immediately benefit from the current price when you start or end a trade since the action is instantaneous. Another significant benefit of trading with cryptocurrency CFDs is the ability to get started with just a small sum of funds (often, the minimum contract size is 0.1 lot). This feature is very valuable for new traders who have a solid foundation from which to build their trading strategies as they develop their expertise.

You can access a variety of crypto assets in one location when you choose an online CFD forex broker like IronFX for your cryptocurrency CFD trading. You may also establish your Take Profit and Stop Loss before completing your CFD contract, allowing you to manage your risk wisely as well as save time by partially automating your trading. As long as you control your portfolio properly and remain conscious of the dangers involved with using leverage, you have the choice to use leverage as well.

How to start trading crypto CFDs

• Select a trustworthy broker: Search for a broker that is licensed, has a positive reputation on the market, and provides the entire range of crypto products you wish to trade.
• Create an account. This procedure should be quick and free. Be aware that a trustworthy broker may request that you confirm your ID as a measure to ensure safety and fraud prevention.
• Deposit funds: You must deposit money into your account before you can start trading. Although some brokers also take cryptocurrencies, the majority of brokers only accept deposits in fiat currencies like USD, EUR, and GBP.
• Choose your preferred crypto: The majority of brokers provide well-known cryptocurrencies like Bitcoin, Ethereum，並且 Litecoin, but you may also seek newer cryptocurrencies.
• Choose a trading strategy: You must choose your trading strategy before you enter a trade. Choosing your investment amount, placing stop-loss and take-profit orders, and figuring out your risk tolerance are all part of the process. Additionally, think about the amount of capital you are willing to lose if a trade doesn’t work out for you.
• Enter your trade: You may execute your transaction once you’ve chosen your trading approach. This includes deciding on the investment amount, the trade’s direction (buy or sell), and the stop-loss and take-profit orders.
• Keep track of your trade: Once you place your trade, you must keep an eye on it to make sure it is operating as anticipated. You may exit a position at any moment to reduce losses or take your profits.

Cryptocurrency 风险提示： Cryptocurrency CFDs are an extremely high-risk, speculative investment, and you may lose all your invested capital. Before trading, you need to ensure you fully understand the risks involved, taking into consideration your level of experience and investment objectives. Seek independent advice, if necessary.

免责声明:
This information is not considered investment advice or an investment recommendation, but instead a marketing communication. IronFX is not responsible for any data or information provided by third parties referenced or hyperlinked in this communication.