If you prefer Bitcoin trading with fiat currency and not a digital currency, then you can do it using derivatives called CFDs or Contract of Difference.
How bitcoin CFDs work?
You can wager on cryptocurrency pairs like BTC/USD and BTC/ETH. If you feel that the price of BTC will rise then go long [buy] and in case it is expected to fall, then go short. Thus, you get a chance to earn from both rising and declining market environments. The main concept to understand before you enter BTC CFD trading is leverage. Leverage has the potential to increase as well as decrease your money.
When you open a bitcoin trading account on a CFD brokerage platform like ADSS, there is a need to deposit a percentage of the trade’s total value. It can be a maximum of 20%. It is popular as a margin requirement. For example, if you are opening a trade worth 10,000 dirhams, then there will be a need to pay 500 dirhams as a deposit or margin. Nevertheless, you will receive 100% gains, if your prediction is correct.
Margin allows amplifying your wins using a minimal initial amount, but it also can magnify your losses because the calculation is based on the position’s full value. It means you can end up losing more than the minimum initial deposit. It is a crucial feature you need to bear in mind before trading BTC CFDs.
Bitcoin CFDs potential trading benefits
- Margin trading means magnifying wins
- No need to own any bitcoins itself to trade
- No need to handle crypto exchanges or open an e-wallet for BTC storage
- You can earn from the price increase as well as price falling environment
- Easily gain access to bitcoin CFD trading using conventional or fiat currency
- CFD trading regulated platform like ADSS offers great customer service
- Features like stop-loss, take-profit, technical charts, etc. are available for risk management
Bitcoin CFDs potential trading risks
- Leverage trading means amplified losses
- Lose more than the deposit amount
- Unsuitable for long-term holding as brokers charge daily overnight fees
- BTC is highly speculative and volatile
- CFD is also dicey
Get to know the key terms used in BTC trading
Before you open a CFD trading account on ADSS get to know the technical jargon you will come across.
Ask price – You can purchase a CFD at this price.
Bid price – You can sell a CFD at this price.
Leverage – if you choose 4:1 leverage, it means you trade’s value is four times of initial outlay. Suppose you have 1,000 dirhams but with 4:1 leverage you can open a position with 4,000 dirhams. You can enjoy four times the profit in case of right prediction but great loss [more than deposit] if you are wrong.
Margin – It is the upfront amount you need to deposit in your ADSS bitcoin CFD account to open a position.
Stop-loss – It is an order that you set on a pre-determined price at which your CFD position automatically closes. Thus, your loss gets minimized if the price moves opposite you.
Take-profit – It works similarly to stop order but it closes at a profit level, where you secure it before the market declines.