Bitcoin is a volatile cryptocurrency that is ideal for CFD trading. One unique characteristic of contracts for difference is that you can make money when the price of the asset rises or falls. But to increase your odds of success, you should find a reputable broker. Here are the reasons why most traders prefer bitcoin trading with CFD brokers.
- Trade on a margin
A CFD broker allows you to trade on a margin. You can open a large position with a small initial deposit. This makes it more cost-effective compared to other investment methods. For example, you can buy coins worth $2000 when you only have $1000. Irrespective of your initial trading capital, you can amplify your gains from the market swings. With a leverage of 5:1, you can start trading with $1,000 and open positions worth $5,000. While the price of Bitcoin may be higher than the ordinary assets, you can benefit from the high margin. If you don’t feel competent enough, you can try the free demo account to harness your skills.
- You can trade rising and falling markets
There are many trading opportunities for Bitcoin which allows you to trade in different markets. If you speculate the digital currency will rise, you can open a buy position. Most Bitcoin CFD brokers allow the investors to go long or short. In addition to that, you can get live market updates to help you make a wise investment decision. Once you open a trade, the transaction is executed in a split of a second so you can react quickly to the market movements.
- Limit your risk and reward
Whether you want to buy or sell the cryptocurrency, you should align the trading scenarios with your strategy. You simply set the stop loss and take profit to set the amount you’re prepared to lose. But most importantly, you don’t have to monitor your positions 24/7. These tools are great when you want to practice money management. Note: you don’t physically own the asset, but you can predict whether the price will rise or fall. This means you can speculate on the change of the currency.
- Simple to trade
While trading is associated with technical issues, you don’t have to be tech-savvy. Novice traders can learn how to trade in a few minutes. The major currencies available include BTC/USD, BTC/EUR, BTC/ GBP among others. CFD brokers offer easy to set up accounts. And just like in other financial markets, you can take advantage of the dramatic price swings to make money. It’s imperative for new traders to perform due diligence before they execute a trade. The broker will also guide you on the best account for beginners and advanced traders. If you have some knowledge of financial markets, you can trade Bitcoin. Of course, you can take advantage of low spreads to build your trading account.
- You can use advanced trading instruments
CFD cryptocurrency brokers allow you to access a wide range of technology. Considering the notoriously high volatility, you can use unique tools to protect your account from devastating loss. Besides that, there are many indicators at your disposal. The advanced charting tools can also help you improve your overall performance. A broker should have a library of resources, signal services, educational tools, and charting software.
- Better regulation
Most CFD brokers are regulated by FCA UK, CySec, and other reputable institutions. You can trade knowing your capital is protected from bad practice, fraud, and outright theft. And in case the broker files for bankruptcy, you can be sure you’ll get your money back. Customer funds are protected by FSCS which means your money can be refunded back by the government. This gives peace of mind that your funds are in safe hands. Secondly, you don’t have to worry that your Bitcoin will get lost. And as with other cryptocurrencies, security is paramount. A reputable broker uses the highest encryption protocols and SSL technology to safeguard your funds. If a broker is unregulated, it becomes much harder to get your money in case of bankruptcy.
- Great customer support
CFD brokers offer unmatched customer service through phone, email, and live chat. Unlike their traditional counterparts, you don’t have to wait for ages to resolve the problem on your own. The customer service support is the face of the company and shows the transparency of the broker. Choose a broker that offers customer support 24 hours. The live support service should also be available in multiple languages.
A CFD broker offers a platform to help you react quickly to price movements. Other than that, you can use the risk management tools to increase your odds of success. When choosing the best cfd broker, do your homework on regulation, trading conditions, and leverage. Remember, your investment decision must be based on individual trading style and investment goals.
Carolyn Coley is a blockchain reporter. She joined Smartereum after graduating from UC Berkeley in 2018.