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Bitcoin CFD and Futures Trading – Not for Wimps

What does CFD mean?

CFDs are a form of derivative trading in which an attempt is made to make a profit by speculating on rising or falling prices in international financial markets or financial products such as currencies, government bonds, indices and stocks or commodities. The CFD, a Contract of Difference, is a highly speculative derivative. These products are generally associated with high risk. This is due to their nature as leveraged products. The motto that clearly applies to professionals as well is that higher risks must be taken along with higher chances: Your capital is subject to risk.

A particularly well-known and popular type of CFDs are Bitcoin Futures. Most CFDs that Bitcoin Trader trades on well-known cryptocurrency broker platforms are a type of futures contracts. BitcoinTradingSites is a good source for all questions around Bitcoin trading, BTC CFDs and Futures with reviews of all possible brokers in that area.

What is a leverage product?

The Bitcoin CFD trade earns its profits from the differences of one currency pair, two different currencies, where there is a currency difference, called the ping. A ping is a decimal place in the conversion. Actually a tiny one. But through the so-called leverage effect, mice become elephants. This means that the trader gets a much more extensive trading position for little capital investment. With a leverage of 1 to 17 for example, one dollar will be the equivalent of 17 dollars in the market. The broker lends the trader the rest, so to speak. This is called margin trading.

How a Bitcoin CFD works

The trader trading CFDs will not sell or buy the actual value. Rather, this underlying value of a real stock, commodity or currency pair is divided into units that can be purchased. A broad range of products offered by the broker is of great importance. It should include shares, commodities, currency pairs as well as government bonds and, of crucial importance, a stock index such as Germany 30, which summarises the price development of German shares. For every point now that the price moves in a positive direction for you, you make a profit. If the direction of the price is against you, you will make losses accordingly. The price of the CFD is very volatile, meaning that large jumps are not uncommon.

What makes a CFD?

  • There are no order fees, except for stock and futures CFDs
  • it is a truly transparent product
  • There are no limited terms for CFDs, except for futures CFDs
  • there are no fair value losses
  • the client benefits and participates in rising and falling prices
  • it is possible to trade extremely high volumes with very low capital investment

What are the holding costs when trading Bitcoin CFDs?

Wall Street buildingThe holding costs are amounts incurred for holding the strike price when positions are held after 5 p.m. New York Stock Exchange time. However, if the product has a fixed expiration date, these costs are already included in the price of the product. The holding costs are therefore an interest rate that can be negative or positive, depending on the reference interest rates or also on market conditions. This interest rate will be based on the respective level of the reference interest rate of the corresponding currency of the product.

What are market data fees?

In order to trade successfully, up-to-date information is essential. Who would like to look at the CFD price data as a trader therefore, will take out a subscription. This runs regularly monthly. Depending on the conditions of the provider, the fee will be refunded if the customer trades a certain number of times. A distinction is also made between private and non-private investors. The fee also varies according to the nationality of the trader, in some countries it is taxable. Usually it is only possible to close a trader's account after the account has been covered to the extent that the market data fees are paid. The subscription will be regularly renewed on a monthly basis.

What is the obligation to make additional payments?

Due to the margin trading associated with the leverage function, a loss may significantly exceed the client's real capital in his trader account, eat it up and a debt may continue to exist. The debt will now affect the trader's other assets unless risk mitigation or other arrangements are made. As soon as the account goes into deficit, the trader is therefore obliged to settle it. One of the options available to the bank is to 'force close', meaning that all open CFD positions will be cancelled. If even this amount is not enough, the trader is still fully obliged to settle, but must pay from his private assets.

What is meant by commissions?

Commissions exist only for stock trading. So a commission fee is also due for CFD bitcoin trading. The commissions start at about 0.05 percent of the total positions that are traded. There is also a minimum commission fee of regularly about $5.

What is a Demo CFD Account, Simulator?

On such an account, which is set up for training purposes, one trades with demo money, the newcomer is able to get to know the market under real conditions. With fictitious contracts, fictitious limits a tool for the optimal jump into CFD bitcoin trading.

Conclusion

The CFD bitcoin Trading is not one of the least risky. The leverage effect catapults profits, but also losses quickly into the shambles. Even professionals often stand helplessly before the volatility of the price. So the leverage can be a blessing as well as an evil.

FAQ

What is the Difference between CFD bitcoins Trading and  Stock trading?

Contracts of Difference are financial products. The price of the CFD derivative is based on the underlying, shares, indices or commodities etc. as the base. The trader is only involved in the price development of the units he trades. CFDs are so-called OTC products. These are products, 'over the counter', meaning that trading does not take place directly on the stock exchange, but via a partner institute, a bank. Bitcoin Futures can be traded on regulated exchanges like Bakkt.comor on pure crypto derivatives exchanges such as Deribit.

What exactly is a Spread?

This refers to the difference between the purchase price and the final selling price. The broker calls the two terms Bid and Ask. The ask, or the selling price, will be the price to pay to make a purchase. If you want to sell, the bid, the purchase price, applies. The difference is the spread of the trader, i.e. the score, which is his margin. It is, so to speak, the compensation that the broker takes for his efforts. The narrower the spread, the more profit for the customer. Thus, the spread is one of the decisive variables in a broker comparison.

What is Metatrader?

This is a free of charge provided software. It has its own scripting language and is used for the development of indicators and trading systems, options. The Metatrader represents a popular electronic platform for the future, Forex, and CFD trade. He is multilingual.