Mar 29, 2021
5 Reasons to Use Crypto CFD Trading Platforms
Where to take your first step in CFD trading, and why.
What is Contract-for-Difference (CFD) Trading?
Contract-for-difference trading is an alternative to traditional investing, which gained massive popularity worldwide over the past decade.
You do not own or have the obligation to deliver the underlying asset, you are merely speculating on the price changes.
What Are The Benefits of CFD Trading?
CFD traders seek to benefit from changing prices without owning the underlying financial asset, enjoy the low capital requirements of margin trading, as well as other diverse trading opportunities like having no stamp duty*.
Unlike traditional share dealing, there is no transfer duty* to pay on a CFD trade as you don’t take physical ownership of the underlying asset.
5 Reasons To Use Crypto CFD Trading
1. The ability to trade on both rising and falling markets
CFD traders speculate on prices of an asset going up as well as down, so you can try and benefit from selling (shorting) as well as buying (going long) opportunities.
Many traders use CFDs as a way of hedging their existing portfolios through periods of short-term volatility. With greater flexibility in pursuing opportunities, traders enjoy greater control over how, where, and when they open positions in a market.
2. Leverage
Leverage is funding from a platform that is intended to increase a trader’s position size and its market exposure, thus its potential profitability.
The term ‘leverage’ refers to how much the position has been increased by.
For instance, 1:100 leverage will increase a $500 Bitcoin position to be as big and as profitable as a $50,000 Bitcoin position.
Using this same example, a trader’s initial deposit of $500, (which is referred to as the ‘margin’), is used as collateral if the asset’s market price was to move in the opposing direction.
Thus, the most a trader can lose on a leveraged trade is the available margin, which as you can see is fractional in comparison to the potential winnings if the trade is successful.
3. Bonuses
Bonuses are company funds that are attached to the clients’ profile.
This will amplify the account balance thus exposing the account to the possibility of even greater potential profits.
These bonus funds are added by the platform (at their discretion) and usually as a percentage of the clients’ initial deposit.
Eg. A client invests $100 and a bonus of $100 is added.
4. Stop-Loss Risk Management System
A stop-loss point is a means of preventing full loss exposure of the invested amount per trade.
Therefore, the Stop — Loss allows the trader to set a limit as to the maximum amount they are willing to risk per trade.
This is known as Risk management. For example, a trader may invest $100 on a specific Crypto asset and set the stop-loss of 10%. This means that should the trade go against the trader the most that can be risked is $10.
5. Education from Platforms
One of the most important aspects that separate the great trading platforms from the rest is the value-added services that they provide such as a dedicated training academy.
Training academies offer a tailored service specifically customized for each clients’ needs whether they be novices or expert traders.
Clients can expect an in-depth walkthrough of the platforms as well as receiving information regarding the basics to advanced theories on trading.
Considering the potential profits one can make using these kinds of platforms, choosing one that offers first-class education should be high up on your list of criteria.
Conclusion
Contract-for-difference trading is an alternative to traditional investing gaining massive popularity worldwide over the last decade.
CFDs hold several distinct, potentially lucrative advantages to traders because of their ability to maximize capital investments.
CFDs offer traders a wider range of opportunities to invest, namely; place trades on the rising and falling of prices, leverage, bonuses, risk management, and expert education.
Investigating which platform meets your personal needs is the last step before depositing.
- My personal favorite is CapitalCrypto. They offer a superb education course as part of their basic package.
