Cryptocurrency exchanges have been a traditional way of trading cryptocurrencies over the past years. We often overlook that there is another way of trading cryptocurrencies, that can figure out the price movements. The method is none other than making use of CFDs (contracts for difference).
CFDs are money related subsidiaries which are led as agreements between a dealer and a business organization. At the point when we have a deal, we don’t claim the fundamental resource. Instead, we have the privilege to get the contrast between the present estimation of an asset and its incentive later on.
However, trading cryptocurrencies is always better when it’s done via CFDs than other digital exchanges. Not sure how? Well, let’s demonstrate the scenario.
1- Direct market access: If you are an advanced trader, you can get direct market access or DMA. This enables you to trade directly into the order books of the stock exchange and forex providers. So, instead of trading at the buy and sell prices offered by your preferred trading platform, you can trade at the market prices you choose.
2- Trading on Leverage: As a leveraged product, CFDs enable your capital to go further as you only have to put up a fraction of your trade’s full value to open a position. For example, trading share CFDs worth a thousand pounds you’d only need to put up two hundred pounds if the margin rate is 20%. Do remember, while leverage will magnify profits, losses can exceed your initial deposit on a given position if you don’t manage your risk carefully.
3- Going Short: This enables you to trade on both rising and falling markets so you can trade a position whichever way you think the market will move.
4- Tax: With CFDs, you don’t pay any stamp duty. This is because you never take ownership of the underlying assets. And while CFDs are still subject to capital gains tax, you can offset any losses against future profits for tax purposes.
5- Trade a Huge Range of Markets: You can trade cryptocurrencies in a lot of markets via CFDs. You can even trade some markets out of hours to make the most of company announcements.
6- Ability to Trade at Lower Costs: Trading cryptocurrencies via CFDs on your preferred platform (we highly recommend Q8Trade) is always cost-effective. CFD brokerage can get as low as $5, minimum with most around $7. Percentages are generally around 0.07% to 0.1%. Which means you will be trading ten dollars for every $10,000 parcel and twenty dollars for a $20,000 parcel and so on. So trading costs are usually reduced when you’re trading CFDs.
7- Hedging: CFDs are a flexible way to hedge your share portfolio. That’s because they enable you to open short positions, which will turn to profit should the shares you own fall in value.
That’s it! Now you know how CFDs work and why it’s better to trade cryptocurrencies via CFDs. Trading with CFDs is better; however, trading with exchanges is not like loss-making either. They both can bring profit for you. The thing is, trading via CFDs is a more effective way for the day traders so that they can enter and exit without any hassle.