With the increase in the popularity of the cryptocurrency, the term CFD trade is also getting recognition the trade market. So what exactly CFD trade market is? CFD stands for Certificate of difference. It is a trading product that came into existence after Cryptocurrency has entered into the trading world. With the help of the CFD, the broker can offer their clients with a high leverage on the trading deals. However, no matter how profitable CFDs are, you must always remember that CFD are risky deals to make.
In this article, we will discuss everything about CFD and how it is related to the Cryptocurrencies.
What is Certificate Of Difference?
CFD is trading products of the market that allows the investors to make profit out of the assets price variations. In this deal, you just have to make future prediction on the assets’ price variation. If your predictions are right, you gain a profit and if your predictions are wrong, you lose the amount you placed on the deal.
The best thing that comes with the CFD trade is that you earn from the predictions and not from the positive curve of the assets. Even if the price of the asset is on the negative curve and you have predicted the same, you will earn your profit and you can use it as second income source.
By looking at the circumstances of the trade market, you can make long term CFD deals as well as short term CFD deal. However, long term does not mean that you will earn more. It only means that your prediction works on long term cycle.
How Bitcoin CFD works?
CFD trade is more like a bet than a normal trade. In simple terms, you are just placing a bet and predicting on the future outcome. You are just speculating the price variation of the cryptocurrency. For instance, if you think that the price of the Bitcoin will increase in the next 24 hours. You just have to open up a CFD account and have to place a deal predicting the outcome. And if the prediction is right, you are rewarded with profit. But you must remember that the prices of the Bitcoins or other Cryptocurrencies are highly volatile, so the prediction can always go wrong. Hence, you should associate yourself with the cryptocurrencies, only when you have a clear understanding of it.
Advantages of Bitcoin CFD
Bitcoin CFD trade can really help you with marginal trades. In simple terms, you can trade in CFD using the borrowed money. In Bitcoin CFD trade you can open higher position in the trade market. You don’t actually need a huge capital investment to open a higher position in the trade market. You just need enough money that can cover the broker charge.
For instance if you want to open a trade of $1000, then you just need 5% of the total deal that is $50 in your bank account to open a $1000 position the trade market.
Risks that comes with Bitcoin CFD
The risk that is involves in the Bitcoin CFD is the high volatility nature of the Cryptocurrencies. The price variation of the cryptocurrencies is so unstable that it is very hard to predict the price of the Cryptocurrency in the next few minutes in the future. This high volatility restricts the traders to make accurate prediction.
And the second risk that comes with the Bitcoin CFD trade is over committing yourself with the trade. Once you start accruing losses, you think of making deal to compensate the losses. But it can some time backfire with another loss to your account.
In this article, we have tried our best to cover all the necessary detail about the CFD and Bitcoin CFD trading. We have covered how it works, how it has advantages over the other deals and what are the risks associated with the Bitcoin CFD trade. With that being said, now you will be able to trade in Bitcoin CFD without any issue.