How to trade crypto CFDs
The cryptocurrency market each day is becoming more mainstream, with investors getting involved across the spectrum, from retail to institutional, looking to gain some exposure.
Trading cryptocurrency CFDs
Libertex is a multi-award-winning online broker that offers trading in cryptocurrency CFDs among other asset classes in one account. Contracts for Difference, or CFDs, are a type of derivative instrument that allows traders to speculate on a wide range of financial markets.
They can take a trade on whether they believe the price is going to go up or down, without taking direct ownership of the underlying asset.
There is no need to open an account with a cryptocurrency exchange or a crypto wallet to trade. Libertex takes the cryptocurrency price from the most reliable exchanges, to ensure accuracy and competitiveness.
How much money do you need to start trading crypto CFDs?
One of the key advantages of trading crypto CFDs is that a nominal amount of capital can be used. If you are just starting, it can be a good way of kick-starting your trading journey, thanks to the ability to use leverage.
Essentially, a smaller amount of capital can give you access to a higher-value trade. For example, €100 in your trading account with a leverage of 1:30 allows you to open trades to a value of €3000. Do note that leverage can give you the ability to generate higher returns, but it does also increase the level of risk.
When you are deciding on the amount of capital to use in your trading, it is vital to consider your overall risk appetite, and how tolerant you are. Gain an understanding of the different cryptocurrencies’ volatility, as they do vary, some fluctuate greater than others.
Different cryptocurrency CFD trading styles
● Scalping – This trading style focuses on profiting off of small price changes, trying to make a fast profit, and getting in and out of a trade quickly. It would be typically done by looking at a lower time frame chart, such as 1-minute or 5-minute.
● Day trading – It involves buying and selling CFDs throughout a single day’s trading, intending to make a profit from small price fluctuations.
● Swing trading – This would involve holding CFD positions for a few days to a week, looking for bigger price swings in the market.
● Position trading – A trader would typically hold positions for weeks or even months, it would be based on following a long-term trend, looking at a daily to the monthly chart.
Risk management strategies with cryptocurrency trading
When it comes to trading, managing risk is one of the most important aspects to consider. With the simple use of a stop loss, when you place a CFD trade, you also enter a predetermined level of where the position will close if it does against your bias. It can prove to be extremely effective at preventing large losses.
Another risk management strategy to explore is your risk-to-reward ratio. Typically, as a general rule of thumb, traders will want to place a trade with a minimum risk-to-reward ratio of 2:1.
For example, if you place a trade, your risk may be €50, with the chance of making €100. It allows traders to potentially double their money.
Including a predetermined stop loss and a well-considered risk-to-reward ratio are possibly good simple risk management strategies. However, it is still important to note that trading still carries high risks.
Research and news reading before trading
Before entering into any crypto CFD trade, it is important for traders to also potentially consider the fundamentals behind the asset that they are trading. For example, is there any significant news that could have an impact on that digital asset?
News headlines and cryptocurrency updates are constantly coming out, and being in tune with what may be going on fundamentally is also vital.
Simply digesting news articles around the assets you are trading may even potentially help you with an informed trading decision.
Trade for more: Libertex
Part of the Libertex Group, Libertex is an online broker that is regulated by the Cyprus Securities and Exchange Commission.
It offers traders access to CFDs across markets such as cryptocurrencies, commodities, Forex, ETFs, and more. Libertex additionally offers commission-free investments in real stocks, market spreads do apply.
Over the years, Libertex has continued to become globally recognized, collecting 40 prestigious international awards and recognitions.
It has won the likes of “The Most Trusted Broker in Europe” (Ultimate Fintech Awards, 2022). Libertex is the Official Trading Partner of Tottenham Hotspur FC and Bayern FC bringing the exciting worlds of football and trading together.
Libertex Group has grown into a diverse group of companies since being founded in 1997, serving millions of clients in several countries all over the world.
For more information about Libertex visit their website.
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 62.2% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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