8 Reasons to Trade Bitcoin CFDs

8 Reasons to Trade Bitcoin CFDs

Can you make profits from coin while trading CFDs?

A coin is a term often used to describe any online currency or cryptocurrency. Major digital currencies such as Bitcoin or Ethereum are all coins. A coin trading CFD website is essentially a CFD platform, which also offers CFD trading on specific cryptocurrencies.

CFD, contracts for difference, simply allow you speculate or ‘bet’ on the future movement of the price of the financial instruments, such as gold or Bitcoin, regardless of whether current prices are rising or falling.

CFD trading is a ‘bet’ in which you think the gold price will rise. So you would buy 1000 share CFDs to show that bet. 

Now, if the price of gold increases over the spread you will make a proportional profit however if it decreases, you would make a proportional loss.

However, these platforms don’t have any real-world market access, which means you won’t actually own a bitcoin, you’ll be betting on the possibility that the price rises. That means you can’t technically use a ‘bitcoin’ that you buy on the website for much other than selling it later on.

Why is CFD trading better than trading on Bitcoin Exchanges?

Firstly, CFD trading is one of the ways in which new investors/traders can make money. The usual idea about how to make money from Bitcoin is that you trade Bitcoin CFDs; buy at a low price and then sell at high prices. This is a unique situation in the market and you need to hope that the price increases again.

However, in CFD trading, you can make money from rising or falling markets. Since you’re only speculating on the way that the market moves, you can make a profit if the market goes up or down.

That’s not all because CFD trading platforms provide much more trading-based services for clients, such as risk management and automatic trades. There’s a lot of intelligent techs that you can access as a beginner CFD trader as well as strong knit communities that help beginner traders trade bitcoin CFDs.

Diversification

A great advantage when you trade Bitcoin CFDs on the platforms is that they provide you the opportunity to diversify your investment portfolio to reduce the risks associated with trading. For example, in order to reduce the risk with CFD trading, you can trade Bitcoin CFDs of popular coins such as Ethereum or Litecoin. There are several platforms that support multiple digital currency CFDs, this makes it easier to trust and helps people be confident that their investment is secure.

For example, AvaTrade offers CFDs on Bitcoin, Ethereum, Litecoin, Ripple, and Dash. Now some of these currencies might be very volatile on one day, but the other won’t. So it’s important to make sure you diversify your investment in order to secure your future profits.

Free demo accounts to trade bitcoin CFDs!

Web sites such as AvaTrade or eToro provide free demo accounts which can be used to start slow and understand the process of how to trade bitcoin CFDs and why it’s so efficient. These platforms have great courses that you can use to start trading and understand the world of CFD trading. They have webinars, video tutorials and advice from experienced traders to help beginners understand how the platform works. The demo account can be a trial test for people who are interested; since the platform replicates the markets but in virtual currency.

Leverage Trading

Most CFD trading websites offer leverage trading, which is impossible on a regular exchange. In Leverage trading, you can bet as a percentage of a larger trade. In this case, you would get profits or losses based on the large trade. So, you could make a much larger profit from much lesser funds in your account. It’s pretty useful to be able to make much higher profits from a much smaller investment. However, you need to be quite an experienced trader to be able to calculate the risks associated with leverage trading. Be careful, though, this brings on many risks for beginner traders. One should always start slow, trade bitcoin CFDs first!

Margin Trading

Margin trading is essentially like buying CFDs on a loan from your broker. You need to put in around 50% of the trade, and the broker pays the rest. In the case of CFD trading, this ‘broker’ would be the platform itself. It will allow you to trade Bitcoin CFDs on a margin that you normally wouldn’t be able to. So the profit would be all yours, minus the capital borrowed. Therefore, it’s pretty useful to trade on margin since you can make higher trades. Be aware that such trading can be risky since if the trade makes a loss, you will lose your initial investment. So make sure to read a lot about the currencies you want to invest in. Only margin trade after having accumulated a lot of experience. One great way to practice your skills at margin trading is to open a free demo account.

Low Spread

On CFD platforms, the profit or loss are calculated by determining the difference between the opening and closing trade. Let’s imagine you estimate that the price of bitcoin will go down and you buy 1000 share CFDs of bitcoin. The profit or loss in a trade is the difference between opening and closing trades. Imagine the market price decreases, but only by $0.5, so you will not receive any profits since $0.5 is the minimum spread that the price must cover. On more popular CFD trading websites, the spread is pretty low therefore you can make profits from small variations in bitcoin prices. This spread amount is paid directly to the company.

Go Trade Bitcoin CFDs!

If you’re interested in making money from shorting bitcoins, you can try and take a look at popular platforms that trade Coin CFDs: here is our 2017’s Top trading platforms ranking.

The eToro website is quite a new and innovative idea; to mix the community of a social network to the complexity of CFD trading. This mix allows very basic users to master the platform with the help of the education programs. The website has many interesting features as well. For example, if you have many followers who copy your trade, you receive a percentage of the profits. 

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About Article Author

Michael Serrano
Michael Serrano

Michael is an engineer and a bitcoin evangelist. He has been involved in cryptocurrencies since 2013. His biggest wish? 1 billion users of bitcoin, ether and litecoin by 2020. In the last 10 years he has worked for various early-stage start-up as a back-end developer.

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