Advantages for trading Crypto as CFD. Crypto as CFD trading. Before getting into the topic we need to understand what is a Contract for Difference.
The contract for difference or CFD it’s simply a contract between two parties (investor) and an investment (broker, spread-betting or banks). The parties, exchange the difference at the end of the contract determined by the opening and closing prices.
Looking at the same concept, cryptocurrencies are known as a financial instrument. Adopted by major companies and even central banks the CFD aspect of its trading can have both advantages and disadvantages.
Like any other investment, there is RISK!!! The best way to manage risk is by understanding if the rewards can compensate for the risk.
For proper risk management, investors have to be aware of the best possible outcome and the worst case scenario. The three major categories to build proper risk management and/or a smooth and safe trading experience are as follow:
1.Education and market awareness
Education is the most important aspect of this topic since a lot of beginners are investing in instruments they don’t understand. Seeing it and hearing it from friends or social media adds doesn’t mean that is the right thing for you. Investments sites, financial or related news, educators within respected financial firms or brokerages can help beginners.
From the above entities, investors will be provided with the market watch, video tutorials, webinars, and other intraday news. Investors can monitor the behavior of their instrument and understand if its a good time to Buy or Sell.
The most common ones are fundamental analysis and technical analysis. Advanced trading strategies can be when both are combined for a more accurate prediction for Crypto as CFD.
2.Regulations and scams
Part of the scams nowadays is very similar in 80% of the cases such as Ponzi Schemes or Pump and Dumps. Investors and most beginners fail to do their due diligence and investigate the companies or entities if they're regulated.
The most commons ones are “get rich fast”, “100% return on investment” or “algorithmic software”. The easy way to prevent that is by researching the investment firm or broker. Check on their websites, under “AboutUs” if valid registration and license numbers are present.
Assuming they have, when clicking it will redirect to the Security and Exchange Commission who is regulating the company.
3.Deposits, withdraws and transaction fees
The “best” investment is the one where we invest less and make 400% returns, Right? Wrong! there is no such thing and if it were to exist will be out of our reach. When investors decide to go with a broker first thing to watch for is 3D Secure. Securely Encrypted SHA-256 SSL.Top-Level Compliance: PCI-DSS.
You can consider it a plus if underpayment section, a variety of methods can be found. Transferring more than $10k, bank wire is the best way to do it. Nowadays fast methods for both deposits and withdraws can be found with most brokers. In some cases, all are done almost instantly.
Trading crypto as CFD’s
The difference is simple and more rewarding on a short period of time, enabling investors to make profits/losses both buy/sell. A wallet is where investors hold their coin/s waiting for months or years to make some profits sometimes very rewarding thinking that the risk is smaller or nonexistent in some cases.
Blockchain vs Brokers, both are entities providing financial services and instruments to purchase or trade. Blockchain allows its investors to purchase coin or mine them and Brokers allows investors to trade on the value buy/sell.
Crypto as CFD Witch service is better
? The answer may surprise most of you. Is not about better but a matter of personal preference, whatever is more suitable for investors, long-term or short-term, the minimal risk with lower % gains or higher risk with higher % gains.
To conclude the article here is a simple example where you can better understand were the opportunities in terms of buy/sell :
Investor X purchased 1 Bitcoin in December at a price of $20.000 their coin will worth today close to $7.000 he lost $13.000 in 10 months.
Investor Y traded Bitcoin as CFD with a broker and in December he placed a buy position at the price $20.000 noticing after a month that the price for Bitcoin was $18.000
, he closed the position on loss and lost only $2.000.
The same example if the first investor was selling his bitcoin the cost for converting his Cryptocurrency in fiat would be much higher and still most of the banks will not accept funds coming from Bitcoin or any other cryptocurrencies.
Remember in order to hold any coin you need to convert your fiat money into coins and the process may differ but similar altogether Bank -> blockchain -> crypto wallet in between fees for conversions are made both ways.
If the second investor wanted to withdraw the process would be much easier because he didn’t purchase the coin itself, instead he traded crypto as CFD.