Overview of Trading Cryptocurrency CFDs | Blueberry Markets (2024)

FAQs

Overview of Trading Cryptocurrency CFDs | Blueberry Markets? ›

Trading Crypto CFDs allows traders to forecast whether the digital currency price will increase or decrease. For example, the price of BTC/USD is $1,000/1,050, and you buy 1 CFD of Bitcoin for $1,050, your CFD is worth 1 Bitcoin, and the position size is $1,050.

A crypto CFD works in the same way as a CFD for other asset classes, such as FX and stocks - you trade the value of the crypto of your choice against a fiat currency like the US dollar. Cryptocurrencies can see very sudden swings in price, for example, from news regarding possible further regulation of this market.

Cryptocurrency markets are decentralised, which means they are not issued or backed by a central authority such as a government. Instead, they run across a network of computers. However, cryptocurrencies can be bought and sold via exchanges and stored in 'wallets' .

In many countries, trading CFDs, including Bitcoin CFDs, is legal and regulated.

Trading CFDs means you can take a position on markets that are both rising and falling in value. You can 'buy' an asset in the hope that its price will rise (going long), or 'sell' the asset in the hope that its price will fall (going short).

CFD stands for 'contract for difference', a type of derivative product that you can use to speculate on the future direction of a market's price. When trading via CFDs, you don't take ownership of the underlying asset, which means you can take advantage of rising and falling markets by going long or short.

Crypto CFD trading involves entering into a contract for difference (CFD) with a broker. Instead of buying or selling actual crypto coins, traders gamble on their price movements. CFDs allow traders to leverage their positions, meaning they can open larger trades with smaller capital.

Never Invest More than You Can Afford to Lose

For that reason, the first principle is only to invest an amount of capital that you are fully prepared to lose should the market take a downturn. At the very least, you should have enough emergency savings before putting any funds into crypto.

Cryptocurrency is digital money that doesn't require a bank or financial institution to verify transactions and can be used for purchases or as an investment. Transactions are then verified and recorded on a blockchain, an unchangeable ledger that tracks and records assets and trades.

Cryptocurrency trading means taking a financial position on the price direction of individual cryptocurrencies against the dollar (in crypto/dollar pairs) or against another crypto, via crypto to crypto pairs.

Is CFD trading just gambling? ›

Research and analysis are probably the two key distinctions between CFD trading and gambling. Whereas CFD trading is heavily based on extensive monitoring of markets and understanding data, gambling is not.

As it has been proven, historically, most people who start online trading fail. The European Securities Markets Authority (ESMA) reported that between 74% and 89% of all new CFD traders lose money.

This requires constant vigilance of the market and price movements. As well as the use of effective risk management to safeguard funds. Some of the most popular risk management tools used in CFD trading are stop-loss and take-profit orders.

CFDs are illegal in the US because they are an over-the-counter (OTC) trading product. OTC trading products aren't listed on regulated exchanges like the New York Stock Exchange (NYSE), bypassing US regulatory bodies. However, US traders have alternatives such as forex, options and stocks.

There are three problems with the conventional CfD: produce-and-forget incentives, distortion on intraday and balancing markets, and the fact that volume risks remain unhedged.

It's possible to make money trading CFDs with experience and a thorough understanding of how the financial markets work. But, it's well known that around 75% of retail traders (private investors) lose money when trading CFDs.

It's possible to make money trading CFDs with experience and a thorough understanding of how the financial markets work. But, it's well known that around 75% of retail traders (private investors) lose money when trading CFDs.

Cfd Trades is not a trusted broker because it is not regulated by a financial authority with strict standards. We would not open an account for ourselves with them. If you want to stay safe, only sign up with brokers that are overseen by a top-tier and stringent regulator.