In search of an attractive investment opportunity, traders get into the crypto currencies. These are virtual means of payment that exist as data series. The oldest and best known Internet currency is called Bitcoin. Created by Satoshi Nakamoto, the coins appeared on the scene in January 2009.
Since that time, a constant alternation of price increases and decreases has taken place. Several social media platforms and online media praise the digital currency because of its high potential for returns. Trade Bitcoin CFDs with leverage, invest a small amount of capital. The broker multiplies this so that you speculate with a high moving capital.
- The value of Bitcoin is based on supply and demand and is therefore subject exclusively to the user’s interest.
- There are several options for trading Bitcoin with leverage – the best known are crypto CFDs, the most popular trading products among day traders on platforms like these: https://www.bestbitcoinbroker.net/en/for-crypto-daytrading/
- The virtual currency reached its maximum so far in 2017 with a value of 20,000 US dollars for one coin.
- A direct investment in the cryptocurrency proves to be risky due to the fluctuating exchange rates.
Contracts for Difference on cryptocurrencies: Trading Bitcoin with leverage
For beginners, direct purchase of Bitcoin is out of the question due to its high value. In November 2019 investors will pay the equivalent of 8,000 euros for a coin. In addition, many traders lack confidence in the Internet currency. Their advocates predict its increasing importance. They expect its value to rise in the next few years, so that Bitcoin will break through the $500,000 mark. Skeptics lead the past problems with the crypto currency into the field. This possesses few acceptance places in Germany. The moreover one messages over hacked Wallets and manipulations pile up.
Partially economic experts maintain, the maximum value of the Bitcoin is based on a purposeful price increase. The contradictory information about the virtual currency unsettles inexperienced traders. They see the strong price volatility as an incalculable risk. A suitable alternative to invest in Bitcoin are certificates and contracts for difference. If you trade CFDs on Bitcoin with leverage, a low capital investment is sufficient.
To generate attractive profits, the margin is in the high three-digit to medium four-digit range. A CFD is a contract for difference, a highly speculative form of investment. With this form of investment, you place your money on a forecast price trend. In contrast to classic stock trading, you profit from yield opportunities when prices rise and fall.
Traders who shy away from a direct purchase due to high Bitcoin costs participate with a contract for difference in the price of the cryptocurrency without owning it. To trade CFDs, look for a reputable broker. A broker comparison will help you to find a cheap and reliable online stockbroker with a comprehensive offer. If there are several underlying assets to choose from, diversify your portfolio. By doing so, you spread the risk and prevent a total loss. The large number of providers offers an educational program in the form of webinars, tutorials and professional articles.
For beginners, the training material proves to be a relevant source of information. Mainly leveraged CFD trading involves a high financial risk. For this reason, it makes sense to train your own trading skills in a demo account before making an initial investment. The online stockbrokers offer corresponding practice accounts free of charge for a certain period of time. After an average of 30 days you will open a regular trading account or look for another broker. Also read this article about demo vs live trading.
In the demo account you invest virtual money so that there is no risk to your capital. Before you trade Bitcoin with leverage, get to grips with leverage in the risk-free environment. Beginners who overestimate themselves will enter leveraged CFD trading without training. In the worst case, the consequence is a complete loss of the security deposit. So that a wrong decision while trading does not lead to personal ruin, invest exclusively risk capital. The technical term stands for money that you do not need in the immediate future for financial obligations.
Trading CFDs with leverage on Bitcoin – the advantages for retail investors
Invest your money in contracts for difference, bet on positive and negative price changes. As a result, if the Bitcoin price falls, you will benefit from a profit if you open a position. Trading CFDs works with a range of underlying assets. In addition to the crypto currency Bitcoin, for example, you speculate on the price of:
- foreign exchange,
- metals and other raw materials,
- Indices or
With the majority of the underlying assets there is a chance of leveraged CFD trading. Compared to a direct purchase of Bitcoin, trading with contracts for difference has several advantages. Investors pay no transaction fee. Brokers largely use the spreads to cover their costs. For extended accounts they charge a commission. If you use leverage for Bitcoin or another underlying asset, the broker raises the lion’s share of the capital invested.
For this reason, leveraged trading exists as a credit-based form of investment. Respectable online stockbrokers waive the obligation to make additional contributions, so that a possible loss is limited to the security deposit. Leverage means that in the event of a price trend, profits or losses are disproportionately high compared to the capital invested. The investors trade the spread.
The technical term describes the difference between the purchase price and the sales price. As a trader you bet on Long CFD in order to bet on a rising price. If you believe in a price collapse, a short position is recommended. To calculate the Bitcoin leverage, also called leverage, you control the ratio between the capital required and the security deposit. If this is one percent of the trading capital being moved, the leverage is 1:100. With a margin of two percent, the leverage is 50.
The formula from which the leverage is calculated is uncomplicated: 100/ margin call = leverage
Read more here.
In leveraged CFD trading, the broker sets the margin in percent. If the Bitcoin price rises within the agreed period, the investors earn money. If the online stock exchange broker pays them the sum, it is at their free disposal. For example, as a trader you use the capital for a further investment. Solid money management helps you to invest the return in a sensible way. If you reinvest the money 100 percent, you risk a complete loss.
Therefore it makes sense to keep a part of the profit as a reserve. If you trade leveraged contracts for difference on Bitcoin, the leverage is limited to 1:2. This regulation serves to protect investors. For retail investors it is worthwhile to trade CFDs with Bitcoin leverage for the following reasons:
- They speculate with small investments on an underlying asset.
In comparison to the direct purchase of Bitcoin, the capital outlay is lower.
- In leveraged trading with contracts for difference, the broker assumes the majority of the capital commitment.
- By the leverage effect the chance exists to realize disproportionate profits.
Contracts for Difference belong to the highly speculative financial products
When you trade CFDs, you enter into a contract with the broker to pay the price difference. There is no need to buy the underlying asset. The contract is based on the current market prices. Unlike “real” Bitcoin, you do not trade the difference contracts on the stock exchange. They are not subject to stock exchange hours, so that an investment works without any problems at night or on weekends.
For employees and investors who are strongly involved in everyday life, the regulation proves to be advantageous. The majority of brokers offer traders an app that enables mobile trading. On the way or during waiting periods at the cash desk or at the doctor’s office you check your open positions. When trading CFDs on Bitcoin, the low fees stand out. These prove to be lower than with other financial instruments. Although Contracts for Difference have many advantages, they are highly speculative and risky.
They are suitable for fully informed investors who have a structured investment strategy. Leveraged CFD trading is not a good choice for beginners. Strong emotions such as fear of loss have a negative effect on trading decisions. As a trader you need patience and a cool head. Furthermore, you regularly observe the market movement and keep an eye on news regarding the crypto currency.
Brokers offer you a trading software with a chart analysis and other tools that support you in making trading decisions. Before you start trading CFDs, you should familiarize yourself with the platform and its features. For beginners, for example, an online stockbroker is suitable, which allows social or copy trading. Both options give you the chance to imitate the strategy of an experienced trader.