Cryptocurrency is a new type of asset that has been drawing the attention of traders all over the world. Because cryptos represent virtual assets, a cyber-based form of currency, the rules and guidelines for making a profit in the marketplace of cryptocurrency are quite different from those that govern traditional stock and bond trading.
The first thing for beginners to do is figure out which of the dozens of major cryptocurrencies to trade. After that, you’ll want to master the basic “mechanics” of trading cryptos. Finally, for those who want to maximize their profits without putting a huge amount of capital at stake, there’s the option to trade Contracts for Difference on cryptocurrencies. Here’s how it works.
The Main Currencies for Trading
One thing investors should do first is choose the cryptocurrencies that suit their own trading personality. There are hundreds of cryptos out there, but only a few that are considered major players. Plus, new ones are cropping up all the time so it’s usually a wise move to choose a few that have been around a while and built up very large followings. As is the case with stocks and bonds, the more actively-traded the asset, the easier it is to sell or buy at any given time. More buyers and sellers make for an active marketplace. Right now, the most actively-traded cryptocurrencies include Bitcoin, Ethereum, Zcash, Litecoin, Monero, Ripple, Dash, Cardano, NEO, Bitcoin Cash, and EOS. There are hundreds more, but these are the ones that see 90 percent of the daily trading action.
How to Trade
The first two items that any crypto trader needs are an exchange, and a virtual wallet to safely store the keys to their currency. As typical crypto exchanges are largely unregulated, you will want to ensure you are using a reliable and security focused service. Forex brokers are quickly getting into the mix of cryptocurrency trading. They are often regulated by the geographical jurisdiction in which they reside. It’s no wonder they are booming in popularity, as they solve the problem of “peace of mind” for traders that are leery about putting too much of their money into an unregulated account. You simply need to select an exchange where you can execute trades. Many beginners use exchanges like easyMarkets for trading Contracts for Difference on cryptocurrency.
Trading Crypto with CFDs
People new to trading cryptocurrency usually want to test the waters with small amounts of capital before committing to larger trades. One of the ideal ways to begin is with Contracts for Difference. These unique financial instruments allow you to get into cryptos without owning the underlying asset.
You’re simply purchasing a “contract” the predicts whether the price of that particular cryptocurrency will go up or down. If you expect Litecoin, for example, to rise in value then you would purchase a CFD to buy at the current price. If the Litecoin market price goes up, then you have earned a profit that consists of the “difference” between your contracted buy price and the new, higher price. CFD trading also gives you the advantage of using leverage by trading on margin. The CFD exchanges, in addition, are much more secure from hacking incidents than the cryptocurrency exchanges are.