If you’re looking to speculate on the price of cryptocurrencies without actually owning them, then CFDs are a type of derivative that may be right for you. When you trade cryptocurrency CFDs, you are effectively betting on the direction of the underlying asset’s price movement. If you think the cryptocurrency price will rise, you can buy (go long). If you think the price will fall, you can sell (go short).
With cryptocurrency CFDs, you can trade multiple cryptos in one go – including Bitcoin, Ethereum, Litecoin and Ripple. Furthermore, because CFDs are traded on leverage, you can potentially profit from both rising and falling prices. You can try trading CFDs through this site here https://www.home.saxo/en-sg/products/cfds.
Find a reputable broker
Before you can trade cryptocurrency CFDs, you’ll need to find a reputable broker. Look for one that offers a user-friendly trading platform, tight spreads and good customer support. You’ll also need to make sure the broker offers cryptocurrency CFDs. Not all brokers do.
Open and fund your account
Once you’ve found a broker, the next step is to open and fund your account, which usually involves completing an online application form and providing some ID – like your passport or driver’s license. You may also be required to upload documents, like proof of address. Once your account has been approved, you can deposit money using a credit/debit card, through bank transfer or e-wallet.
Choose your position
Now it’s time to choose your position. If you think the cryptocurrency price will rise, you’ll need to buy (go long). If you expect the price to drop, you’ll need to sell (go short).
Most brokers will offer a variety of order types, which can help you control your risk exposure. For example, a stop-loss order automatically closes your position at a predetermined level if the market moves against you, limiting your losses.
Monitor your trade
Once your trade is open, it’s essential to monitor it closely. This way, you can make sure it’s going the way you want it to and close it if necessary. Some brokers offer mobile apps, which can be handy for keeping an eye on your trade while you’re on the go.
Close your trade
When you’re ready to close your trade, place a sell order if you’re going short or a buy order if you’re going long. Your broker will then execute the trade and settle your account accordingly.
Benefits of trading crypto CFDs
CFDs are flexible
CFDs are a versatile investment tool – allowing you to go long or short, set stop and limit orders, and trade on leverage. This flexibility can help you take advantage of both rising and falling markets.
CFDs have low costs
When you trade CFDs, you generally only have to pay the spread – the difference between the buy and sell price. There are no commission fees or hidden costs. Because CFDs are traded on leverage, you only need to put down a small deposit – known as margin – to open a position.
CFDs are easy to access
Nowadays, it’s easy to trade CFDs online. You can open an account with a broker in minutes and start trading immediately. Thanks to mobile trading apps, you can even trade on the go.
CFDs offer a variety of markets
When you trade CFDs, you’re not just limited to shares. You can also trade forex, indices, commodities, cryptocurrencies and more, giving you plenty of opportunities to find profitable trading opportunities.
CFDs are regulated
Financial authorities regulate CFD trading in many jurisdictions. It provides peace of mind that your broker is reliable and your funds are safe.
Risks of trading crypto CFDs
You can lose money
Crypto prices are highly volatile, so they can rise and fall rapidly, making cryptocurrency CFDs a risky investment. If the market moves against you, you could lose all or part of your deposit – known as a margin call.
The market is unregulated
The cryptocurrency market is largely unregulated, so there is no government oversight. This lack of regulation increases the risk of fraud and scams.
Cryptocurrencies are not legal tender
You need to remember that cryptocurrencies are not legal tender in Singapore, meaning there is no government protection if things go wrong during trading.