How to trade CFDs on ВТС

Cryptocurrencies are gaining popularity all over the world. One can hardly be surprised if, in the near future, cryptocurrencies will become widely accepted as a means of payment and replace fiat currencies, including the US dollar.

Nowadays, the quotes of many cryptocurrencies have risen sharply. For example, in 2011, one bitcoin cost less than $1. However, in 2017, its price reached almost $20,000. Currently, bitcoin is worth $61,000. Last but not least, during all this time, the bitcoin price has been rather volatile, offering excellent trading opportunities in the bullish and bearish markets.

One may wonder at such mind-blowing market quotes. Yet, if you think that only large market players can trade crypto, you are wrong.

Nevertheless, it is not necessary to buy crypto. You do not have to own digital assets if you can exploit them. There is no need to purchase altcoins if you can benefit from them in another way. That is why many speculators choose an alternative and effective way of earning on crypto — trading with CFDs.

A contract for difference (CFD) is a contract between a buyer and a seller through the intermediate services of a broker. CFD contracts include stocks, bonds, gold, oil, silver, copper, major stock indices such as the Dow Jones, DAX, NASDAQ, S&P, world currencies, and other liquid instruments, as well as cryptocurrencies.

A CFD contract does not imply buying the underlying asset. It provides an opportunity for private investors to earn money on nonstop fluctuations. Traders buy a CFD on an asset of their choice, and then sell it, making a profit from the price difference.

Therefore, it is a great opportunity to make money on swings in the exchange rate of the most volatile instrument – cryptocurrencies, in particular bitcoin. You do not need to buy bitcoin. You just need to obtain a contract for difference (CFD) on BTC.

Provided that a contract for difference remains open on your account and the BTC price rises, you will receive the same profit as if you owned bitcoins. All you need is to correctly determine the movements of the price.

CFD trading on BTC: who can be interested in this?

• - Traders who open positions for a few minutes or hours.
• - Traders who are reluctant to buy the digital currency itself.
• - Traders who do not want to get into details on how to safely purchase and store bitcoins (creating and encrypting a wallet, downloading a backup copy, etc).
• - Traders who are not ready to spend large amounts of money on bitcoins.
• - Novice traders who have at least $10.

Advantages of bitcoin CFDs

• - CFDs are traded on the same platforms as currency pairs.
• - Transactions are executed very quickly. You can open short and long trades simultaneously.
• - You can open and close long (buy) and short (sell) positions on bitcoin any day, at any time during the day.
• - You can close a position at any time and return your CFD to the broker.
• - You can open a free demo account without initial investments.
• - You have an opportunity to practice and get used to the market with the help of a broker.
• - You can start trading with only $10 in your pocket.
• - The broker's leverage allows you to significantly increase your capital with minimal investments.
• - Traders do not need to pay additional taxes and other fees required on the exchange.

Many traders have already tried their hand at BTC trading. Therefore, it is pivotal to take into account a number of research that will help you understand how to trade this asset. Bitcoin is very sensitive to crypto market news, e.g. investments by large companies, hacker attacks on crypto exchanges, or statements made by governments and regulators.

When choosing a strategy, you may focus on the simplest trading tools. Naturally, it would be a wise decision to apply money management and Stop Loss orders.

Apparently, when trading CFDs on cryptocurrency, the main costs are associated with the spread (the difference between the ask and bid price). For example, the bid price for BTC may total $61,000, while the ask price could be $61,050. It means that the spread will be 50.

Example: long position

Instead of buying bitcoin, you can place a long position. Your position will get more profitable along with the growth of the bitcoin price. If the price drops, then your position will also be less profitable.

In this example, the BTC price is $61,000/61,050. A trader buys 5 CFDs on bitcoin for $61,050. Each CFD equals 1 bitcoin (or 100 bitcoin cents), so the position size is $305,250.

If the BTC price rises by $500 to $61,500/61,550 and a trader closes the position at $61,500 ($307,500), he/she will make a profit of $2,250. Alternatively, if the bitcoin price drops to $60,500/60,550 ($302,500), then after closing the position, a trader will lose $2,750.

Example: short position

You can also place a short position. If the BTC price falls, your short position will get more profitable. Conversely, if the price rises, you will incur losses.

In this example, the BTC price is $61,000/61,050. A trader sells 5 CFDs on BTC for $61,000, so the position size is $305,000.

If the price climbs by $500 to $61,500/61,550 and a trader closes the position at $61,550 ($307,750), he/she will lose $2,750. Alternatively, if the bitcoin price drops to $60,500/60,550 (the position is now worth $302,750), then after a trader closes the position, the profit will total $2,250.

If you are a newbie and have limited knowledge of the financial market, you can apply to the recommendations of analysts before opening a position. For example, InstaForex analysts publish articles on various instruments, including bitcoin, every day.

InstaForex offers superb conditions for CFD trading

• - wide range of instruments.
• - high leverage up to 1:10. This ensures low margin requirements, starting from 1%. Depending on the underlying asset, margin requirements will not exceed 10%, which allows even traders with small capital to enter various markets.
• - unlimited amount of the deposit. One can start trading with just $1 on the account.
• - access to all the markets from one trading platform. Clients can choose between two platforms: the most popular MetaTrader 4 platform and its improved version - MetaTrader 5.
• - access to up-to-date analysis, training courses and signals for trades that novice traders can use when taking firsts steps in their career.
• - reliable and time-tested broker. Over 7 million traders around the world have already chosen InstaForex. There is no need to say that this number is constantly growing.
• - opportunity to use the same account for trading CFDs, currency pairs, and other instruments.

Important: InstaForex offers the most beneficial conditions for CFD trading thanks to low margin requirements and commissions, fixed spreads, as well as the opportunity to hold a position indefinitely.