March 29, 2024

CEX.IO company blog | Cryptocurrency CFD trading mechanics: what to consider in order to earn

CFDs on cryptocurrencies allow you to make money on any market movements and are suitableboth for speculation and forhedging. How to work correctly with this derivative in order to use all its advantages in trading, we will consider in the article.

A bit of theory

Crypto CFDs are Contracts for Differencedigital asset prices. Regardless of the movement of the asset price, whether it goes up or down, you can earn money without owning, buying or selling the cryptocurrency itself.

If you expect the price to rise, youopen a buy position. If you're right, make a profit. If not, the difference in price, taking into account the size of the open position, will become a loss. If you expect the price to drop, then open a sell position. If the price goes down, you will make a profit, if up - a loss. You do not need to monitor the market in order to enter a trade at the only suitable moment, you can do it at any time when you can estimate where the price will go.

Correctly decided on the movement - earnedprofit. When working with cryptocurrencies through exchanges, you have only one option: you can open a buy trade, waiting for the price to go up. It will not work outright short without already having long open positions.

CEX.IO company blog | Cryptocurrency CFD trading mechanics: what to consider in order to earn

Opening long and short positions with CFDs in the rising and falling markets

Why CFDs?

For those who have already tried to work for financialmarkets are known for CFDs on traditional assets - oil, gold, currencies. Their main advantage is that professional traders can earn even with small amounts due to leverage.

Crypto CFDs amplify these benefits asin cryptocurrency, price movements are more significant. Namely, due to price changes, profit is formed in CFDs. High volatility provides great earning opportunities for those traders who are willing to take big risks.

At the same time, CFDs on cryptocurrencies are closely related tothe spot market. A CFD is executed by a broker (intermediary for each trade) in the spot market, rather than simply price-pegged (like futures). That is, the strike price is formed by the total market liquidity. In the case of futures, it is different. The price of futures is formed by supply and demand for “expectations” at asset prices.

How to get started with crypto CFDs

Choose a platform for margin trading

There are different platforms that offer CFDs oncryptocurrencies. The success of your trading is largely determined by parameters that are invisible in a superficial analysis, when you pay attention to the platform's features and even its popularity. When choosing, pay attention to how the liquidity issue is implemented, how the order execution logic is implemented, what is the configuration of the product itself.

CEX.IO company blog | Cryptocurrency CFD trading mechanics: what to consider in order to earn

At the beginning of this year, a crypto broker launched its own platform for margin tradingCEX. IO Broker, which is part of a group of companies led by the regulated crypto exchange CEX. IO.The experienced team offered the market access to professional and reliable financial instruments, including margin trading and derivatives.Using a specific example, we will show you how to start working with cryptocurrency CFDs and what to look for.

3 first steps to work with CFD

1. Open an account

</em>To work, you need a trading account onplatform for margin trading. If you are not confident in your abilities and want to practice, CEX.IO Broker offers a free demo access without registration, so that you can test the service in the current market conditions without using real funds. If you are ready to work in the real market, open a trading account.

2. Fund your trading account</em>

You can fund your trading account with CEX.IO Broker in two simple ways: transfer from the CEX.IO exchange or directly from your crypto wallet. Please note that transfers between the exchange and the broker are instant and free.

The funds that you have deposited into your trading accountare the collateral for opening positions. They ensure that by leveraging, you will get back the borrowed capital even if the price moves against you.

The leverage that CEX.IO Broker offers is 1:10, which means you can increase your trading capital by 10 times.

3. Open positions

As long as the funds are simply in your account, they will not start to bring you profit. It is important to start opening positions so that the deposited funds work for you.

When you open a position, a certain amountyour funds are blocked, acting as collateral. You can always withdraw funds from your balance that are not tied to any position. When you close a position, the funds used as collateral are adjusted for profit or loss and returned to the balance sheet. Then they can be used to open new positions or withdrawn.

To open a position, you need to placeorder: market order if you want to open a position immediately, or limit order if you want to open a position at a specific price or better. You can see the types of orders available on CEX.IO Broker at the time of placing them. After opening a position, you watch what is happening in the market in order to close your trade at the right time.

What else is important to know?

If you want to implement multiple strategiesat the same time, the function of multiple multi-currency trading accounts will be useful to you. CEX.IO Broker allows you to keep up to 5 trading accounts to give a trader the ability to split positions with different parameters. This setup makes it possible to understand exactly which of your strategies is more successful, brings more profit and can be scaled.

Unique advantage of CEX.IO Broker is that you get access to two platforms at once: a crypto broker platform and a cryptocurrency exchange. This is not only the ability to use one wallet for instant transfers, but a way to expand your trading strategy, working simultaneously in the delivery market through the exchange (when you sell and buy the cryptocurrency itself) and the non-delivery market (when you buy and sell CFD derivatives) through a shared wallet. ...

Currently, seven pairs are available in the platform 24/7: BTC / USD, BTC / EUR, ETH / USD, ETH / EUR, ETH / BTC, LTC / USD, LTC / BTC. Trading accounts can be replenished with different currencies, including bitcoin and ether.

CEX.IO company blog | Cryptocurrency CFD trading mechanics: what to consider in order to earn

Flexible risk management when trading crypto-CFDs with a crypto broker is implemented using cross-margin within trading accounts and isolated margin between accounts.

Cross margin allows using profitof one position on a trading account to meet the margin requirements of another position on the same account. Isolated margin means that each trading account has its own margin levels that do not affect each other. You can use both cross-margin and isolated, unlike other platforms on CEX.IO Broker, you can work with two at the same time.

Cryptocurrency CFDs allow beginners andprofessional investors to participate in cryptoeconomics and earn money, even without owning the assets themselves. The minimum entry threshold provides an opportunity to diversify your trading strategy and your portfolio with tools that provide access to one of the most dynamic financial markets in the world.


Company information

CEX.IO company blog | Cryptocurrency CFD trading mechanics: what to consider in order to earn

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CEX.IO Broker is a CFD-based cryptocurrency margin trading platform, part of the international CEX.IO group headquartered in London.

CEX group.IO entered the crypto market in 2013 and now serves millions of clients in different countries. The companies of the group are licensed in the USA and Europe, and the CEX.IO crypto exchange is one of the largest and most secure platforms in the world for the exchange, trade and storage of digital assets.

CEX.IO Broker was launched for testing in a closed beta format on April 1, 2019, and on January 30, 2020, it was opened for clients. The purpose of the project is to provide traders and investors of the cryptocurrency market with access to professional and reliable financial instruments, including margin trading and derivatives.