Cryptocurrency trading has become the hottest commodity in trading over the last couple of years, with traders and investors enjoying very high returns on their investments.
Bitcoin has emerged as the leader, with ethereum at number two as the most popular and most traded cryptocurrency. The high returns and the volatility in the market has enticed many new traders to begin trading in cryptocurrencies, but there are many novices who need to know the ins and outs of cryptocurrency trading.
What Is Cryptocurrencies?
Cryptocurrencies or digital currencies are essentially virtual currencies, they are decentralized and can be exchanged independently of banks and governments like any currency. Prices change at a very fast pace in what has become a volatile market making it a magnet for traders and investors looking to make a profit.
Various Ways to Trade
1. Choosing a CFD service provider traders have peace of mind of not being scammed as they:
2. Offer safe and secure platforms without the need to purchase the underlying asset.
3. Transactions can be completed in seconds around the clock, inclusive of holidays and weekends.
4. A CFD is a leveraged product, so with only a small initial deposit you get access to the full value of the trade, which results in your capital going further.
Choosing a traditional exchange, which does not fall under any regulatory or legal status, which can lead to scams. Also traders are subjected to a rigorous verification process with the need to download and install software before they can start trading.
For the purpose of this article we have chosen a leading CFD broker 24option for guidance as they offer the most popular cryptocurrencies for their CFDs, which includes Bitcoin, Ethereum, Dashcoin and Ripple. In addition to this they are regulated and authorised, so traders can trade safely.
First you will need to open an account, at 24option they only require a minimum investment of €100. Registration is uncomplicated and quick, they offer a variety of convenient payment methods.
Know Your Trading Strategy and Do Your Research
With access to the trading platform, traders need to do their research, by using the variety of graphs and technical tools available. The technical tools are invaluable as it will give insight as to when to get in and when to get out or just stay in traders will be able to come up with their trading strategy on what is right for them. Whether it is long or short-term success, depending on your goals.
• You will be able to enter your position size and define your close conditions.
• Place a trade by clicking on either the ‘buy’ or ‘sell’ button – buy if you think it will rise in value, or sell if you think it will fall.
• On reaching your goal, you can close out your position.
If you decide to start trading Bitcoin, traders will notice that it is usually quoted against the US dollar which has the potential to move 30 percent or more. With CFD trading, traders can open short as well as long positions, meaning that if the price drops, your position increases in value.
The following is a forex pair example (Trading a bitcoin in USD):
The quoted price is currently 2650 to sell bitcoin, or 2660 to buy it. You think that bitcoin’s price will fall against the dollar, so you sell 1 contract at 2650 (equivalent to selling 100 bitcoins at $2650). Suppose Bitcoin’s price falls and the new price is 2600 to sell bitcoin, or 2610 to buy it. You want to take your profit by buying at 2610. The computation is $2650 – $2610 = $40 move or 40 points. The result will be your gross profit is $40 x 100 or $4000. On the other hand if the market had rallied 50 points instead, your gross loss would be $5000.
24option offers traders numerous perks, inclusive of a free demo account, which traders can utilize to practise trades and familiarize themselves with the platform.
*Forex/CFD trading involves substantial risk and may result in a loss greater than the invested capital