If you have heard of the trading on CFD (literally translated as “contracts for difference”), you would also have seen all the warnings that come with it as well as the promises that can seem very enticing, like nothing bad can go wrong.
Yet what do you actually know about trading on CFDs? In this article, we’ll go over the basics, explain the pros and cons of this form of trading and (of course) tell you where you can start this activity, if you decide it’s a good type of trading for you (a little scoop – on PrimeXBT).
The basis: Brief and effective information about the trading on CFDs
CFD is actually short for contract for difference (“contract for difference” in English). It is a type of instrument that does not require you to hold the underlying asset in order to profit from its price movements. The difference between the starting price and the closing price is settled in cash, which means that there is absolutely no exchange of other physical assets or goods. If you think the price of an asset will rise, you buy that contract; if you think it will go down, you sell an open position. Either way, if you’re right, you pocket the difference between the open price and the close price.
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Some of the benefits of trading on CFDs are obvious: this form of trading is fast and only takes a few moments of your time, especially when it comes to trading assets that take a long time to settle.
Since there is no trading of real assets (or even their derivatives, as these can also be traded as CFDs), traders can quickly switch to new trades once their old ones are complete. in order to quickly take advantage of the ever-changing market. CFD markets also have lower capital requirements than most other exchanges, tending to trade on margins, which can amplify a trader’s profits. There are also very few (if any) fees associated with CFD trading, as no asset movement has to be paid for.
On the other hand, CFDs are notoriously risky. They are considered an instrument of trading advanced and are actually banned in some parts of the world, including the United States, in an effort to protect customers. Additionally, if the underlying asset tends to experience price volatility on a regular basis, the spread between the bid and ask prices may be large, which may lead to fewer winning trades and therefore increased trades. losses. It also prevents traders from taking advantage of the small price movements that many rely on when they start trading. trading.
Additionally, we are bound to warn you that the fact that many CFDs are traded on margin can also amplify gains as it also amplifies losses. If you hold a position of tradingyou may receive a margin call, which means that your broker requires you to deposit additional funds into your account.
CFD trading on PrimeXBT
On PrimeXBTcustomers who wish to immerse themselves in the trading on CFDs must open a special account. The account balance of trading is quoted in Bitcoin (BTC), being secured with mandatory address whitelisting and two-factor authentication, as well as bank-grade security. The minimum deposit is 0.001 BTC (approximately $44 as of this writing), and once you’ve completed it, you’re ready to start trading. trading.
Sure, PrimeXBT urges its users to develop a strategy of trading before betting everything, because their user interface is very well suited to the technical analysis required for this. Once you are sure you know what your next steps are, you can start the trading. Remember to never bet more than you are willing to lose (and cover the margin!); and happy trading!
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Warning: This article is promotional content and does not constitute investment advice. Do your own research and only invest the money you can afford to lose.