How To Trade Cryptocurrency CFDs

4 March 2023, 05:56

Guide On How You Can Trade Cryptocurrency CFDs

Trading cryptocurrency can be a daunting task for those new to the market. However, with the right knowledge and approach, trading crypto can be a profitable and exciting way to invest your money. In this article, we’ll explore some of the key steps you need. 

1. Research Different Cryptocurrency To Trade

The first step in trading cryptocurrencies is to research the different options available to you. This will help you understand the different features, uses, and potential of each coin. It’s important to note that different cryptocurrencies have different characteristics and potentials for growth, therefore, it is important to understand the coins you want to trade with.

For instance, Bitcoin, as well as major altcoins like Ethereum are relatively stable compared to many other smaller altcoins like Cardano or Ripple. Each coin comes with its own list of associated technologies and rationale for existing – which are weighed against market forces like sentiment. In addition to the usual volatility that cryptocurrencies experience, this makes crypto tricky to invest in, making research extremely important.

Learn More About Cryptocurrencies Trading

2. Come Up With A Trading Strategy

Because of the risks associated with cryptocurrencies, it is important to come up with a trading strategy so as to minimise said risk. This includes things like deciding on the timeframe you want to trade or the amount of capital you are willing to risk on each trade, which will affect things like your stop loss or take profit levels.

Trading strategies include scalping, which entails buying or selling larger volumes in a short time frame in order to profit from the small, frequent price movements caused by market volatility and inefficiencies. Scalpers usually trade the most liquid markets, and are well positioned to benefit from trading cryptocurrency CFDs. This is because the leverage offered by CFD brokers allow scalpers to take on larger positions with less capital – which is especially important since they trade smaller price movements. 

Other strategies include dollar-cost averaging, where money is invested in a cryptocurrency at regular intervals so as to smooth out market volatility on the assumption that, in the long run, the price of your chosen cryptocurrency will appreciate in value.

bitcoin cryptocurrency stock market concept

Understand Why You Should Trade Cryptocurrencies

3. Make Your First Trade

One of the benefits of trading cryptocurrencies with a CFD broker is that there are no risks or costs associated with trading actual coins. For one, you do not need to set up a cryptocurrency wallet in order to trade them. Most exchanges also have some manner of restriction when trading altcoins with fiat currency. Some require users to convert fiat into bitcoin or a stablecoin like USDT first; while others levy additional fees on fiat-to-crypto transactions.

With CFDs, even altcoins can be traded directly using fiat currency, all with no additional fees besides the usual spreads and swaps.

This means that your first crypto CFD trade is as easy as opening an account with a brokerage like PU Prime, making a fiat deposit, and opening your first position on a cryptocurrency of your choosing. 

4. Keep Track Of Your Trades 

It’s important to keep track of your trades and monitor the market to identify potential opportunities for closing your position. While your trading strategy should already have an exit plan, the unpredictable and turbulent nature of crypto means that you should also keep close watch on the ongoing situation, and decide whether to cut your losses early, or ride out the downturn – keeping in mind the associated costs of holding a position overnight. 

5. Keep Your Cryptocurrencies Coins Safe?

Thankfully, with trading crypto CFDs, there’s no need to worry about the possibility of being hacked since, unlike with a crypto exchange, there are no actual cryptocurrencies being stored anywhere. This means not having to set up a cold wallet or remember a dozen complicated passwords.

Final Thoughts

In conclusion, trading cryptocurrencies can be a great way to make a profit and diversify your investment portfolio. However, it’s important to take the time to research different coins, and remember that cryptocurrencies, especially with leverage, is a volatile and risky asset class – so risk management is important. 

Interested In Trading Cryptocurrency CFDs?