Buying Bitcoins can be a very frustrating process as there are not too many reputable Bitcoin Exchanges and funding your account takes time and is limited to wire transfers in most cases. Since Bitcoin transactions are irreversible, the exchanges will not accept deposits using Credit Cards, PayPal or any other reversible ways of sending money in order to avoid the risks of chargebacks.
The good news is there is another way to profit from the Bitcoin frenzy. It’s more accessible, requires smaller investments and can generate higher profits. Now you can trade Bitcoins through a professional CFD broker.
What is a CFD Broker?
CFD stands for “Contract For Difference”. When buying a CFD on a specific asset through a broker you are required to have enough funds in your account to cover for the potential difference in the asset price in case the asset you purchase will lose value. The broker will offer you leverage and allow you to buy contracts that are higher in size compared to your total account value. Contract For Difference can also be ‘shorted’ or sold. This means that you can sell an asset without even owning it if you think the value will decrease in time.
One of the high profile brokers is now offering CFD’s on Bitcoins. The broker is Ava Trade.
How to trade Bitcoins with Ava Trade?
Trading Bitcoins with Ava Trade is very easy. After opening an account and making your first deposit you are ready to trade Bitcoins. At Ava Trade you can deposit as low as $100 and they accept a wide range of funding methods including credit cards, debit cards, PayPal, Moneybookers (Skrill), Neteller, Webmoney and more offers a leverage of 10:1 for Bitcoins, since the digital currency is considered a very volatile asset. The leverage of 10:1 works in the following way: if the Bitcoin’s market price is $1,000 and you have $1,000 in your Ava Trade account, you are able to buy or sell a contract of maximum 10 Bitcoins (the contract is worth $10,000). This way you have a purchasing power of five times your bankroll. In a regular Bitcoin Exchange you are able to buy only one Bitcoin with $1,000, but at Ava Trade you can buy a contract for 10 Bitcoins with the same amount.
There are both advantages and disadvantages of leveraged trading. If you correctly predict the direction of the price you will make much higher profits when using leverage. The downside is that the risk is also higher. If the price moves against you, your loss is higher, and you can even lose your entire investment and be forced to close your position by a margin call. The broker reserves the right to automatically sell your contract if the loss equals the amount of money you have in your account. We recommend the use of leverage only for people who are very well aware of how these instruments work and have experience in forex or CFD trading.
If you have difficulties in understanding how leverage works or if you prefer to take smaller risks, you can still buy contracts equal in value to your bankroll. This way you don’t risk a forced sell if the value crushes and you’re able to keep your Bitcoins as long as you want.
Considering the initial example of $1,000 for one Bitcoin and the account size of $1,000 you can simply buy a contract for only one Bitcoin. This way you cannot risk to have your position closed in case the Bitcoin falls in value for a while.
If you think the Bitcoin is going to lose value because it has already risen too much in a very short time, you can sell Bitcoins without even owning them. You can simply sell the CFD contract and you will make profits from the decrease in value. This is called ‘short selling’ in financial jargon and is often used by investment funds when the markets are falling.
Please share this article
No comments:
Post a Comment