What would you do today if you learned cryptocurrency trading five years ago? Cryptocurrency is a new venue for many people looking for an alternative platform to invest in. During the initial release of bitcoin as open-source software in 2009, there were many skeptics. These doubters had the perception that despite the hype around, it would fade away like a vapor.
With over a decade and the massive technological advancement, these skeptics are the “front officers” on the importance of crypto trading. In this article, you will learn what cryptocurrency is, how it works, and how to trade cryprocurrency online.
What is cryptocurrency?
There is no complication to this question. Cryptocurrency is a digital currency (it exists on computers only), which is transferable from one person to another without any middleman required.
If transactions take place on computers alone, where are the details of these transactions? Transactions get recorded on a unique digital public ledger. Blockchain is a famous word used to describe the digital public ledger.
To safeguard both the ledger and data, cryptography is applied to encrypt this sensitive information. Additionally, the cryptocurrency market is decentralized, making it not controllable by any government but the computer algorithms and users.
What is cryptocurrency trading?
Crypto trading is the process of speculating on price movements of cryptocurrency through contracts for difference (CFDs). While cryptocurrency trading is the buying and selling of digital coins through an exchange. Cryptocurrency CFD trading allows you to enjoy the fluctuation of it based on Contracts of Difference. There are numerous digital coins in the cryptocurrency list, with new coins added every day.
How does cryptocurrency work?
It is essential to understand how it works because only then you will be more knowledgeable as to how to trade cryptocurrency CFDs. Transactions take place through peers with the help of a cryptocurrency wallet. The individual creating the transaction uses the wallet to transfer funds from one account to another.
To transfer the fund, the individual must know the private key associated with such an account. These transactions undergo some level of encryption before being broadcast to the network. After this, the transactions are queued up to be included in the public ledger or Blockchain.
Perhaps you have heard about "mining;" it is the process of recording these transactions on the public ledger. No matter the cryptocurrency coin you have, you have access to the Blockchain; that is if you decide to access it.
Features of cryptocurrency
The following are a few features of crypto that makes it distinct from our traditional currency.
- Fast and global
What influences the cryptocurrency market?
Many factors contribute to price movement in the cryptocurrency market. However, the market moves following supply and demand. Although they are decentralized, we still have certain factors that may negatively or positively impact price movements. Some of these are:
- Supply and Demand
- Market capitalization
- Key events such as security breaches, economic setbacks, and regulatory updates
- The health of Fiat currencies
- Political and governmental regulations
Today, the selling and buying of cryptocurrencies have become very attractive amongst traders. It is the reason behind many people getting interested in knowing how to trade cryptocurrency CFDs. The crypto market is an exciting marketplace where traders can enjoy the fluctuation of the market.
Generally, traders should invest or trade what they can afford to lose. Since cryptocurrency trading is not a “get-rich” scheme, instead should be considered as an investment. Traders need to understand the market, study cryptocurrency charts, and patterns. However, this process is time-consuming and requires a lot of effort.
Cryptocurrency trading – how does it work?
HFTrading allows you to trade cryptocurrencies on CFDs. To help traders to speculate if the cryptocurrency of your choice will fall or rise in value. In cryptocurrency CFD trading, prices get quoted in traditional currencies. Furthermore, traders don’t take ownership of the coin.
Also, it’s important to mention that CFDs on the HFTrading platform are leveraged products. A leveraged product means you can decide to open a position for a little fraction of the trade's entire value. However, here is what many traders don't understand in cryptocurrency CFD trading.
With a leveraged product, you can increase your losses or profits depending on the market's direction. If it goes against your direction, then you magnify your losses. You also amplify your profits if it moves towards your direction.
Decide how you want to trade cryptocurrencies CFD
You can trade cryptocurrencies in two ways. The first is to buy the digital currency while the other is to speculate the price using CFDs. We have already talked about the first method, so our focus will be on the second method. Instead of buying cryptocurrencies, you can take a faster step by trading through CFDs using a leveraged trading provider. With HFTrading, you can open an account in a few minutes after you have been verified and found eligible. Furthermore, you can fund your account and start trading when you are ready.
Build a Trading Plan
Building a trading plan is essential to your success because the market is very volatile. Volatility is a double-edged sword; while it makes the market attractive, it is also difficult to trade it if you don't plan ahead. You need to implement a risk management strategy and a system for entering and exiting trades.
Once you have created your trading account and verified yourself by providing the required documents, you can begin trading oncryptocurrencies CFDs with HFTrading.
Why should you consider cryptocurrency cfd trading?
Cryptocurrency CFD trading offers numerous possible benefits for traders. Here are a few:
- High level of volatility
- The market is open 24/7
- Improved liquidity
- Ability to trade long or short
Below you may find some of the most popular cryptocurrencies:
- Bitcoin – This crypto coin was created in 2009, with over 16.7 million in circulation as of December 2017. Today, traders can buy bitcoin through an exchange and speculate the movement of prices through CFDs.
- Ethereum – Although it was launched six years after bitcoin, it is the second-largest cryptocurrency and operates similarly as bitcoin. The tokens are called ether and used for payment on the network.
- Bitcoin Cash – This crypto coin came as a result of a hard fork with bitcoin. A hard fork is a situation where there is disagreement within members of a particular cryptocurrency community.
- Ripple – This crypto allows the transfer of any kind of currency throughout the world. The primary aim of the coin is to enable people to perform secure, fast, and low-cost transfers through its network. There is no risk of chargeback or fraud on the network.
- Litecoin – It is a peer-to-peer cryptocurrency and a big competition for bitcoin. It is four times greater than bitcoin in terms of total supply, currently at 84 million.
The cryptocurrency market is wild and fast. Every day, we see the fluctuation of the market, which can be unpredictable. You need to equip yourself with the best reliable information to stay ahead. HFTrading provides everything you need to educate yourself before you begin trading. Cryptocurrency CFD trading with the platform comes with various advantages such as:
- Leverage trading
- Multiple platforms – mobile, desktop, and web trading
- Availability of auto-trading
- Fast order execution
- 24/7 customer service
- Numerous online courses, articles, tutorials, VODs, and e-books to keep you informed about what is happening in the market.
Cryptocurrency CFD trading can be fascinating, but you have to be prepared, you need to have proper training from the right sources. Using your knowledge alone may not be the only ingredient of the recipe. However, using the right financial service provider like HFTrading will not only change your perspective towards trading but also will give you access to the proper knowledge through the courses, articles, tutorials, e-books, VODs and state-of-the-art tools available here.
FAQ: what is cryptocurrency trading
- Does cryptocurrency trading contain spread like forex trading? Yes, the cryptocurrency market behaves similarity like any financial market, where you see two prices – the bid and the ask prices. The spread is the difference between the sell and buy price quoted for a currency.
- Is there leverage in crypto trading? Leverage is having access to a large amount of cryptocurrency to trade different coins while having a little amount in your account. In crypto CFD trading, you can deposit a small amount and enter trades beyond the amount deposited. It should be noted that the leverage on the cryptocurrency is much lower compared to other assets.