Due to constant technological advancements, we are beginning to notice the opportunities offered by trading with CFDs. This is the revolution of traditional trading and this allows us to adapt to the ever-changing world we live in. The main concern which new traders possess is the ability to adapt to the markets and understanding the type of trading knowledge needed to be a part of the revolution. Here are some basic steps in order to trade CFDs.
1. Learn all you can about CFDs
Contracts for difference (CFD) is a derivative product that allows traders to speculate on a variety of cryptocurrencies without actually owning the asset. To name a few, These cryptocurrencies include BTC/USDT, ETH/USDT, LTC/BTC, BLK/BTC and many more.
CFDs are leveraged so it is possible to begin trading with a small deposit, also known as a margin. Despite the minimal deposit, both profit and loss are calculated on the full size of the trade which can potentially increase profits. Like other forms of trading, due to the risks involved, it is crucial to learn about CFDs before beginning to trade. The more knowledge traders have about CFDs, the better they will be able to calculate risk.
2. Develop a trading plan
Any endeavor is only as good as the prior planning. A well-defined trading plan helps to provide clarity on how trading should be conducted, even when markets are volatile. The trading plan should focus on your style and level of understanding of the environment, as well as how willing and open you are to the market. If you need some help, the CoinsFM team consists of account managers to assist.
3. Create a trading strategy and stick to it
A trading strategy summarizes one’s preferred style of trading and includes the approach taken to enter and exit trades as well as indicators and tools that are used. The most popular tools in the cryptocurrency market are those that measure volatility and the direct effect it has on the price of the asset. Two technical indicators are Bollinger Bands and Stochastic RSI. The strategy is generally based on the time frame which the trader is willing to dedicate to monitoring the markets.
4. Analyze the Markets
Pricing, Volume, and Timing are a few of the most vital aspects of a CFD trading strategy. To elevate your confidence and overall understanding, the entry and exit points of the market have to be identified through analysis. Traders typically use two types of analysis: fundamental and technical. Each type of analysis can be used individually, but a combination of the two is commonly used. Fundamental analysis is more theory-based and therefore uses current events like breaking news, macroeconomic information, and changes in globally renowned organizations. Coinmarketcap and Newsbtc are a few of our most trusted sources of information. Technical analysis is a practical approach to understanding the market, by directly reviewing the specific market and making informed decisions based on its movements. This is implemented to ultimately predict the direction a market will take, based on the analysis of historical price charts. CoinsFM offers educational services in order for their clients to potentially master the fundamental and technical aspects of trading to the best of their ability.
5. Take note of the position size
When opening a new position, it is important that traders consider the available capital and the risks they are prepared to take. The position size is the trade’s total market exposure, and traders should decide how much capital they are prepared to trade. They must also bear in mind that CFD trading is leveraged, which means the position size is considerably more than the initial deposit. This allows the initial position to be more attractive to the market and can potentially increase profits drastically.
7. Start small, diversify later
At CoinsFM we pride ourselves on our capability to offer our clients a service that ultimately grows the confidence, transparency and long-term relationships. Over time, traders usually become more comfortable and trust in their strategy, therefore they can begin to diversify to include a larger range of asset classes in their portfolios. CFDs are an excellent way for traders to introduce themselves to a wide range of assets.
8. Keep in the know
At CoinsFM, we believe that knowledge is power. Always elevate your trading skills by constantly being updated by market movements using fundamental tools and sources, such as Cointelegraph and Elevenews. Although there are many more, feel free to diversify your research tools and sources to be in the know of global advancements, as well as factors that affect trading.
Apply These Guidelines and Keep Learning More
As traders gain experience in CFD trading, they will soon formulate an understanding of financial terms, eventually finding a trading strategy that best suits their analytical and theory styles. To ensure future success, traders should continue to learn all they can about CFDs.
