There is a large selection of brokers on the market who offer trading with Bitcoin CFDs in addition to trading in Forex, indices and stocks. This has the advantage that users can choose the provider that offers the most advantages. It should also be noted, however, that the selection is not always easy, as the brokers sometimes show great differences.
What is a Bitcoin CFD?
A CFD is a so-called “difference contract” in which traders place their money on the price development of products such as the currency. Accordingly, customers do not buy Bitcoins themselves, but try to correctly predict the future development of the Bitcoin price. Here it is possible to bet money on both the positive and negative price development.
The more points the price moves in the aforementioned direction, the more money the user receives on the basis of a predetermined return. If, on the other hand, the Bitcoin currency price moves in the wrong direction, traders lose money accordingly. The loss or profit is always calculated by the difference between the selling and buying price of Bitcoin CFDs.
If the traders receive a return by trading the options, they can have the money paid out directly or use it for further trading. In this case, however, there is a risk of losing the said yield if the price is incorrectly estimated.
Where can I buy a Bitcoin CFD?
It is important to know that not only Bitcoins can be traded as CFDs, but shares, indices, commodities or forex are also available. As a result, the respective options are offered on different markets. Traders must be aware that some markets are not permanently available, for example only 5 days a week.
In order to be able to use the Bitcoin CFDs as often as possible, an account should be opened with a provider who has access to as many of the markets as possible. This gives the customer many options to choose from. Afterwards, all that remains is to select the CFDs that correspond to the probable price development via the personal account.
For this it is naturally necessary that the customers deposit real money on the user account with the respective broker. In the beginning it is worthwhile to bet small amounts in order to gain experience with the practice of CFD trading. Then higher sums can be used to earn more money.
Which Bitcoin CFD Brokers are the best?
Many tests were conducted by experts to find the best broker. For trading Bitcoin CFDs, the following five providers should be named:
Here customers can first of all count on the fact that they are serious and licensed providers. This means that traders do not run the risk of losing their money to a fraudster. The risks of trading have also been reduced by using high-quality trading platforms such as Metatrader on these pages. This software is sophisticated and secure.
Also it should be mentioned with these brokers above all that trading is very flexible, simple and extensive possible. Accordingly, there are many options available for Bitcoin CFDs that can be used. But also other offers like for stocks or forex can be found.
10 Tips for CFD Trading
1. Protect your capital in CFD trading
At the beginning of your trading career, it’s all about getting your capital. At the beginning you have to learn to swim in the shark pool of CFD trading. A simple trick is not to try to make a profit, but to get your money. You will see, protecting your capital is not easy. What’s the point of having the best CFD trading system in the world when you’ve lost all your money? Therefore, it must always be your goal to keep your losses low.
2. Make sure you have an advantage
It goes without saying that you need a profitable trading system or an advantage in the markets. There’s a saying in poker: “If you look around and you can’t see who the fool is, it’s you!” In trading, the pros are used to taking money from you. That’s why you have to be diligent, disciplined and confident to have an advantage in the markets. Work hard and concentrate on maintaining your advantage and continuously improving your financial situation.
What are examples of trading advantages?
- your money management system
- a perfect entry-level technology
- the ability to remain patient and wait for opportunities
- beginner mistakes NOT to make
- it could be your ability to trade news and react quickly during news events
- the ability to increase profit positions and maximize a profitable trade
The above list is only a starting point. Don’t underestimate your abilities. Work hard to improve your strengths and minimize your weaknesses.
3. Watch out for the CFD lever
- The CFD leverage enables you to trade 100 times or even 400 times the amount of money you actually have on your trading account.
- A high leverage is good for you if you are successful. You can always hold larger position sizes if you win. But the inevitable loss always lurks around the corner.
- You’ve probably heard of traders who have managed to convert a small account into a much larger account and then lose all their winnings.
- You don’t need this emotional roller coaster ride or margin calls. Be aware of the risks associated with every CFD trade.
- Start with a small CFD lever and keep the riksiko low. When you start trading, start with a leverage of 25 : 1 or a maximum of 50 : 1.
- If you are a day trader who is interested in scalping strategies, keep the leverage at 10 : 1 or lower.
4. Trade CFDs always with stop/loss
- Stop/Loss Order help to minimize your loss and preserve your valuable capital.
- You should assign a clearly defined stop/loss to each of your trades. Ideally, your stops should be trailed when your trade is in profit.
- Many traders are emotional when their trade is in the red. They refuse to accept a loss trade and extend the stop/loss. They believe the market will miraculously turn back in their favor.
- Sometimes this happens, but much more often the account is emptied. Do not make this mistake. If your trade is in minus and running towards the sop then it is so. Losses are part of trading.
5. Set realistic trade targets
Besides trading tip 1, (protect your capital), your main goal is to keep your CFD trading account intact and stay in the game for the first year. Survival is of paramount importance in the financial markets if you want to make a long-term living from CFD trading. Your money is your tool. You must have a plan where you want to go when trading. Wouldn’t it make sense to look for a path towards a stable and successful CFD trading career?
Here is a simple target writing process:
- identify what you want to achieve
- focus on it every day
- avoid all distractions that will take you away from your goal
- make sure you have an advantage (Cfd Trading tip 2)
6. Keep a trading diary
A CFD trading diary allows you to record your trades. Your CFD trading diary allows you to gain clarity about the reasons why you opened or closed a trade. It will also help you to recognize your mistakes and learn from experience. Here are some important points that should be in your CFD trading journal:
- What instrument did you trade?
- The time when the trade was entered and completed
- Reasons behind trade – technical, fundamental
- Was the trade a profit or a loss?
- Did you follow your trading rules
7. Trade with a trading plan
Are you a manual daytrader trader or do you use automated systems? In any case, you need to set up a reasonable trading plan that determines the following:
- Entry Strategy – Test hundreds of entry setups. Prove it works. If you use backtesting software (Metastock, AmiBroker, TradeStation, NinjaTrader, etc.), this process will be pleasant. If you are not able to test ten years of data in a few minutes, your only option is manual testing. Obviously manual testing takes time, but the reward is worth it.
- Money Management – How much of your capital do you want to use per trade?
- Risk Management – How much risk do you want to take on each trade?
- Trading Diary – Keep your trading statistics up to date with a daily CFD trading diary. A handy companion is to keep an eye on the economic calendar every day. There are a few trading apps that you can use every day to monitor events.
Your trading plan is to keep you calm in the heat of battle. It helps your self-confidence, especially if you know you have an advantage, but you’ve just had a few losses in a row.
8. Be disciplined
- Once you have created your CFD trading plan, you should follow it with discipline. Remember that you have spent countless hours testing and researching your CFD strategies.
- Trust what you’ve done and rely on your strategies to prove themselves in the markets.
- How many times have you closed profit positions before the trade has reached your trading target? How many times have you increased loss positions by extending the stop/loss?
- Stay with your system. Only if you consistently run your system for a few months and still make no profits, you should change it.
- Then build a new CFD trading strategy and be disciplined to follow the new trading rules.
9. Scale your CFD trading
- It’s scary how successful traders are neutral most of the year. That means they don’t make money, but they don’t lose money either. However, there is usually a window within a year in which their profits are well above average.
- In any trading year there is usually a period of 2 to 4 months in which your trading strategy produces profits on the assembly line. You place a series of successful CFD trades in a row.
- The crux, however, is that you don’t know when the winning streak will occur. You need to keep your CFD trading account intact during the lean months.
- When the market spins, it’s time to replenish your winning positions.
- All successful traders analyze how they can pyramidize winning positions and execute them on their trading systems.
- Note that pyramidization strategies work best with trend-following strategies. If your trading system does not offer the opportunity for good trend trades, scaling is not suitable for you.
10. Keep a positive attitude
- Do not treat trade like life or death. Take the time to learn the basics for successful stock and CFD trading.
- Maintain a positive attitude on your way to becoming a successful day trader. If you have learned the basics while trading, you can take advantage of trading.
- Hopefully these CFD trading tips can help you get started in the financial markets.
Final remark for trading CFDs
Only with the right providers can the risk for trading with the crypto currency be correctly weighed. Accordingly, future traders should take their time before opening an account with one of the available providers. Of course, there are always new providers on the market who offer a better version of Metatrader.
For this reason, users should always keep up to date in order to take advantage of the best offers. Currently, however, it can be assumed without further ado that trading with Bitcoins via the five named providers is best possible.
FAQ – Important questions and answers about trading Bitcoin CFDs
How are Bitcoin’s prices (rates) determined?
As with most products, supply and demand for the currency determine the current rate. It is therefore important to note that there is a limited number of Bitcoins in circulation. This is still a comparatively small amount of this currency, so even small changes can cause the rate to fluctuate quickly and strongly.
Can the Bitcoin rate drop to zero?
Throughout history, there have been many currencies whose value has continued to fall over time until the rate was worth nothing. This could also be the case for Bitcoin, which is a risk that traders always have to pay attention to. However, it should not be forgotten that in the past the decline of currencies was mainly due to hyperinflation.
This cannot happen at Bitcoin, but there is still the possibility of technical failure, a competing currency or even economic or political issues.
What happens if another crypto currency comes up?
Currently, Bitcoin is still the most popular virtual currency available, but other currencies may be added. This may well lead to this currency being overtaken sooner or later. In this case, however, it is necessary that the new crypto currency brings with it significant improvements, which is currently not the case. So Bitcoin will certainly be preserved in the future and its importance will continue to expand.