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CFD Trading Accounts and Trading Crypto

Posted by Thandiubani on Tue 20th Sep, 2022 - tori.ng

It’s not uncommon for derivatives traders today to know hedge funds, bonds, futures, and options, among other instruments — both fixed-income and equity.

 
CFDs are contracts for differences in the prices of digital assets. Regardless of the movement of the price of an asset, whether it goes up or down, you can earn money without owning, buying, or selling the cryptocurrency itself.
 
If you expect the price to rise, you open a buy position. If you are right, make a profit. If not, the price difference, considering the open position's size, will become a loss. If you expect the price to drop, then open a sell position. 
 
If the price goes down, you will make a profit; if it goes up, you will lose. You don't need to monitor the market to enter a trade at the only right moment. You can do it anytime when you can estimate where the price will go.
 
Correctly decided on the movement — earned a profit. When you trade crypto and deal with cryptocurrencies through exchanges, you have only one option: you can open a buy trade, waiting for the price to go up. Shorting outright without already open long positions will not work.
 
Many traditional finance traders have discovered the wonders of crypto and derivatives recently. The esoteric natures of these instruments have inspired many aficionados to master them—often in their entirety.
 
It’s not uncommon for derivatives traders today to know hedge funds, bonds, futures, and options, among other instruments — both fixed-income and equity.
 
The same is true of crypto. Derivatives such as crypto call options offer traders many opportunities to profit. As with most other instruments, it’s imperative to have a firm understanding of the underlying assets when trading calls.
 
CFD trading accounts can help you realize these opportunities. Once you have a free CFD trading account, it’s time to master the art of derivatives trading.
 
What are CFDs?
 
Contract for difference, also known as CFDs, is a type of derivatives contract. These contracts enable the trader to convert differences in asset prices into profits. For example, if the difference between  Bitcoin’s today’s price and yesterday’s price is 25 percent, the trader can convert this into a percentage profit.
 
CFDs vs. Options
 
In many ways, CFDs are like options. Both instruments enable traders to speculate on an asset’s price direction. However, whereas an option gives the owner the right to buy or sell the underlying asset, a CFD gives the trader the ability to buy or sell the asset directly. This is one of the key differences between the two instruments.
 
Another difference between CFDs and options is that options have expiry dates, whereas CFDs don’t. This means traders need to exercise their option rights or liquidate their CFDs before the contracts expire. Also, the option margin is much higher than the CFD margin.
 
Why Trade CFDs?
 
There are many reasons why traders prefer CFDs over options.
  • Lower risk
One of the most significant advantages of trading CFDs is the reduced risk. CFDs have a lower risk profile than trading bitcoin or other altcoins. The high leverage available in CFD trading accounts enables traders to put a small percentage of their capital at risk and gain a sizable profit. This allows them to achieve large gains with minimal risk.
 
Greater profits
 
Another advantage of CFDs is that they allow for greater profits than when trading bitcoins or other crypto coins. Due to the significant leverage mentioned previously, traders can achieve substantial profits. Also, since the contracts enable the conversion of minor price differences into gains, there is the potential for massive gains. This isn’t possible when trading options.
  • Easy trading
Trading CFDs is much easier than trading other types of instruments.  Unlike options requiring extensive research and in-depth knowledge of the underlying asset, CFDs require minimal research. Also, the complicated exercise auction that needs to be undertaken before exercising an option isn’t necessary with CFDs. This is because CFDs already reflect the future price of the underlying asset.
  • Greater volume
Due to the high volume of trading in the CFD market, traders can enjoy much better liquidity than when trading options. This ensures that traders get a good price when buying and selling contracts. Also, the high volume ensures that traders won’t run out of contracts to trade with.
 
Trading Accounts for CFD Trading and Crypto
 
At Exness, we provide a wide range of trading accounts to meet the needs of traders of all experience levels. Our professional CFD trading accounts are designed for traders looking to take their skills to the next level. 
These accounts enable traders to trade various financial instruments, including 
  • CFD contracts;
  • Forex;
  • Shares, and 
  • Commodities. 
Crypto traders will prefer our advanced crypto trading account, which enables traders to take advantage of the new and exciting cryptocurrency markets using advanced trading tools and top-tier security. 
 
Get started with a free demo or trial account today and see why so many customers choose Exness as their trusted home for CFD trading! 
 
Have you been trading CFDs? Do you think it’s the best way to invest? Let us know what you think!
 
Assume you want to buy and sell a crypto CFD. What should you look for in the trader, the trading platform, and the conditions?
 
You don't own the actual coin or token when trading cryptocurrency via a contract for difference (CFD). Instead, you trade on a rising or falling price by taking a long position or shorting the coin by going short. 
 
The long position is when you buy the coin and then wait for the price to rise so that you can sell it for a profit.

Why Take a Long Crypto CFD Position?
 
When taking a long crypto CFD position, you get to: 
  • Earn money when the coin’s price rises
  • Make money even if the coin’s price doesn’t rise all the way but just increases slightly
  • Cash in when you think the market is about to rise and crash
  • Cash in quickly if you think the market is about to rise and the coin is about to crash at the same time
  • Take a break from actually owning the coin and its volatility.
However, there is a risk that the market will turn, and you’ll end up losing your money. Also, fees play a significant role when taking a long crypto CFD position, as they are typically commission-based. These can significantly reduce your profits. 
 


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