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Date:
18th May 2020
Author:
Dalmas Ngetich

What are Cryptocurrencies and How to Trade Crypto CFDs

Cryptocurrencies exploded into the public consciousness in late 2017 when Bitcoin had a historic rally.  Since then, Bitcoin prices have had mixed performances but the industry as a whole has matured exponentially. The cryptocurrency sector is now diverse, sophisticated, and offers unprecedented opportunities.

But what are cryptocurrencies? Cryptocurrencies are digital assets that rely on encryption techniques to regulate the new generation of units and verification of transfer. Cryptocurrencies utilize a digital ledger called the blockchain to create a network for participants to transact in a transparent and decentralized manner.

Bitcoin is by far the most popular cryptocurrency and has taken the status as “digital gold” and likened to physical gold due to its scarcity. Any cryptocurrency that is not Bitcoin is classified as an Altcoin. Altcoins like Ethereum (ETH), Ripple (XRP), Bitcoin Cash, and Litecoin have a significant market presence with deep market liquidity and market valuations.

Cryptocurrency trading has undergone a remarkable transformation in the past five years. Gone are the infancy years of only buying BTC and hoping to sell for a profit when prices rise. Today, all kinds of crypto derivatives like Contracts for Difference (CFDs), Options, Futures, and Perpetual Futures are available to potentially profit from the fluctuation of crypto price movements including ETH and XRP by tracking fast-moving markets.

To put it across bluntly, the main reason to trade crypto today is that there are a lot more avenues to profit than ever before. With professional trading platforms like CryptoAltum, traders have seamless exposure to various markets and reliable, safe channels to place various types of orders without necessarily owning the underlying asset.
Some cryptocurrency trading strategies involve speculating on price movements of digital assets from a CFD trading account. Unlike spot accounts where one can only buy and sell the underlying asset, a CFD account gives a trader a lot of wriggling space and flexibility. 

You might wonder, what are CFDs? A Contract for Difference (CFD) is a contract through which traders can speculate on bidirectional price movements of a certain market without owning the underlying asset. At CryptoAltum, the underlying asset can be precious metals, indices, Forex, or Cryptocurrencies including Bitcoin of which we shall focus on.

The introduction of crypto CFDs into the market gave traders greater flexibility and opportunities when handling crypto. No longer were traders restricted to the rather rigid practice of buying and selling crypto but could instead trade crypto with leverage and potentially increase profits.
Trading BTC, ETH, or XRP without necessarily having to hold has made traders wondering how to trade crypto for profit without the risks of handling the security aspect of owning coins join the fray. Crypto derivatives now constitute a significant portion of daily trade volumes and will continue to increase in importance with time not only bulwarking the crypto space liquidity but allow traders to diversify their portfolio all from the same trading platform.

However, to trade profitably, one must understand the minute details of leverage. Leverage is a word that you will definitely come across regularly in crypto trading. 

A leveraged product means that you only need a fraction of the value of the trade (deposit) to gain full exposure to the underlying market. Your profit or loss is calculated as though the full size of the position made possible using leverage. 

For example, take it that you have a balance of 5 BTC in your trading account. Say you wish to place a trade for Bitcoin with leverage of 1:10. In effect, you open a position as though you had 50 BTC in your account. 

Leverage gives traders the opportunity to magnify their profits—and if the prognosis is wrong, magnify losses.

Besides, you might also want to learn more about ask-bid spread, or simply, spread. Spread refers to the difference between the buy price “bid” and the sell price “ask” prices of the asset being traded. The more liquid the asset is, the lower the spread.

Great brokerage platforms offer low spread and high leverage.
The first step to launching your crypto trading journey is to find a suitable brokerage to open a trading account. The question of where to trade crypto boils down to the quality of services and reliability. 

Given the high stakes in crypto trading, you might as well go for the most reliable, reputable, and powerful trading platforms. There are a number of online crypto brokers who facilitate the trading of cryptocurrencies but few are truly world-class.

CryptoAltum utilizes the open-source, traders-tested platform, Metatrader 5 (MT5), which is widely considered to be the best institutional multi-asset trading platform out there. Trading crypto with MT5 means outstanding trading possibilities and availability of useful technical analysis tools. The MT5 software is available for Desktop, Mobile, Tablet, and Browsers.

To get started, if you are a newbie, open a demo account to guide you through the ropes. A demo account simulates real-life trading, without the risks, and can serve as a useful blueprint before you delve into serious real trading.

After signing up for free with CryptoAltum, you need to fund your account from your existing cryptocurrency wallet. Several coins are supported. The deposit you place when making a leveraged trade is called the initial margin. 

Often Brokerage platforms typically have margin requirements to open and maintain a leveraged position. The margin requirements vary depending on the broker and the size of your trade. 

In summary, the steps on how to trade are as follows:

Register for your trading account on the brokerage platform and install the MT5 software. CryptoAltum allows users to trade crypto without KYC. This fact means that you don’t have to divulge unnecessary personal data like tax information, passport details, etc. MT5 is also free and lightweight

Fund your account from your crypto wallet at the Members Area. First time deposits attract a 100% Deposit Bonus.

Trade! Decide on your price direction and either buy (if you think the price is going up) or sell (if you think the price is going down). Details of your position include the order size, order type, and direction—that is, are you buying or selling. You can choose from 58 crypto pairs. There are no fees, hidden charges, and commission. Pricing is also transparent as CryptoAltum draws liquidity from 10 established providers.
Leverage is what makes CFD and Derivatives trading such an interesting and lucrative field. If you want to know how to trade Bitcoin, you have to understand the concept of leverage and master the skill of utilizing it. 

Trading crypto for profit should be a balance of risk and reward. It is important to appreciate the fact that not every trade you execute will be fruitful, but the hope is to have more winning trades in your portfolio.

You get to refine your craft through practice, discipline, and refining analysis methods like fundamental or technical analysis. Cryptocurrencies are generally volatile and prices are influenced by a range of variables. This is not forgetting the hype element like FOMO and JOMO.

Generally, traders prefer established coins like BTC, ETH, and XRP because the variables are more readily apparent. However, fundamental and technical analysis of smaller cryptocurrencies can give you an opening and a chance to massively profit.

Such analyses allow you to know when to trade cryptocurrency for profit.  Timing and proper decision-making are key to becoming a successful trader. However, be aware that leverage is a double-edged sword, and when used wrong, it can result in huge losses for a trader.

A broker like CryptoAltum that provides high leverage (1:500) is suitable to maximize potential earnings. Besides, one can rely on in-house tools like Crypto Converter, the Real-Time Margin, and the Dynamic Leverage Margin Calculators to make more informed trades.
Choosing a reliable broker with great market depth and liquidity is essential in trading cryptocurrencies. Variables such as fund security, low spread, high leverage, and no deposit and withdrawal fees affect your bottom line. 

As with any skill, practice makes perfect. 

Making consistent profits in trading crypto calls for dedication and consistency. You may not get there overnight, but fortune favors the brave. Take time to understand various markets and orders and sooner rather than later you see light at the end of the tunnel.

What's next? 

Market volatility is a crypto market signature. Market movements are as random as they are profitable for prepared traders ready to spin the market and earn big rewards. These are five reasons why you should trade Crypto CFDs.
Risk Disclosure: Trading cryptocurrencies or any other financial instrument involves a significant level of risk and may result in a total loss of your investment. You should consider carefully whether investing in Bitcoin or any other instrument offered by CryptoAltum is appropriate to your financial situation. CryptoAltum only accepts deposits in Cryptocurrencies. By trading with CryptoAltum you acknowledge your understanding of this risk disclosure and your agreement with the Terms and Conditions.
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