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Cryptocurrency trading explained
Cryptos are the new kids on the online trading arenas, but these late arrivals made quite an entrance. In recent years the popularity of cryptocurrencies in commercial use has been increasing, but they’ve also encountered some major hurdles and setbacks, resulting in extreme volatility. Some people will tell you that cryptos are the face of the future and that they’re here to stay. Others will claim that Bitcoin, Ripple, Ethereum, etc. re no more than a bubble, doomed to disappear as time passes.
Well, regardless of what you believe will happen, one thing is certain: Cryptos are not only a form of exchange, but also tradable instruments, and they can be traded directly or in the form of CFDs.
Trading CFDs on cryptocurrencies
One of the key features of trading crypto CFDs is a trading tool called leverage. It allows you to open larger deals than the equity in your account, essentially increasing your trading power while also increasing risk. The maximum leverage depends on the CFD instrument and is dictate by the local regulators. When trading with Vestle, an FCA regulated broker, the maximum leverage on cryptos is 2:1.
This means that with a £500 investment, you can open deals worth up to £1,000.
How come? Because £500 (investment) x 2 (leverage) = £1,000.
Now, let’s take a minute to talk about short and long trading...
Sell or Buy?
Let’s say, for example, that you believe that you want to invest in Bitcoin CFDs and believe that the price of this crypt will soon rise. What will you do? That’s right: You will buy the CFDs, hoping to sell them later when the price (if your prediction was correct) increases. This is called a Buy deal and some people also refer to it as a ‘long deal’ or ‘going long’.
Now, what happens if you believe the price of Bitcoin will decrease? In that case, you would open a Sell deal, also called a ‘short deal’ or ‘going short’. Sell deals are available for CFD traders because, as we mentioned earlier, you are not actually buying the instruments. You invest in their price.
How to open a cryptocurrency CFD deal with Vestle
- Choose a crypto CFD
- Figure out your deal size
- Decide if you want to Buy or Sell
- Click ‘Deal’
Since the cryptocurrency market is open around the clock, this is a great opportunity to discuss market orders. By setting Stop Loss and Take Profit orders, you can have better control over your funds and open deals and better manage risks.
What can affect the price of cryptocurrencies?
- Related legislation
- Technological changes
- Level of stability in global markets
- Other cryptocurrencies
- News and publicity
Want to access the cryptocurrency market? Join Vestle today to benefit from free updates, information and support.