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Can I Trade Cryptocurrencies on Forex or CFD Platforms? Albury - NSW

Published date: 2021/08/24 16:15:04 GMT
  • Location: Albury - NSW, New South Wales, Australia

Can you trade cryptocurrencies on forex / CFD platforms? The quick answer is yes, it is possible. However, significant variations apply to trading cryptocurrencies on forex and CFD platforms that need to be taken into account when comparing them to buying and selling cryptocurrencies on exchange markets.


How Are Cryptos Traded On Forex/CFD Platforms?


It should be noted that what is traded on most forex / CFD platforms are cryptocurrency contracts for difference (CFDs). In other words, the trader is entering into a contract with the CFD provider on an underlying asset (for example, Bitcoin ). These derivatives are based on the price movements of the assets but do not involve an exchange or possession of the cryptocurrency.


This means that there is no real cryptocurrency exchange, nor are there any wallets or addresses to worry about. This also reduces the hacking risks that pose a real threat to even the best and most trusted crypto exchanges. CFD traders can focus their full attention on how to take advantage of market movements. Profiting from cryptocurrency trading on forex / CFD platforms is possible when you have a buy position, and the sale rate of the cryptocurrency increases above its initial purchase rate. You benefit when the cryptocurrency's purchase price falls below its initial sale value if you have a sell position. Similarly, buy positions will be at a loss if the sell rate falls below the initial purchase value, and sell positions are at a loss when the buy rate rises above the sale price with which it was opened—the position.


How is Cryptocurrency Trading on Forex/CFD Platforms Different from Exchange Markets?


There are several main differences between trading crypto on a forex / CFD platform and trading on an exchange market:



  • No digital crypto is exchanged in any of the transactions.

  • It is not necessary to have a cryptocurrency wallet.

  • Cryptocurrencies are traded under the terms and conditions agreed with the forex / CFD provider.

  • Cryptocurrency CFD trading is leveraged.

  • You can trade crypto-fiat pairs like BTC / USD or LTC / USD, unlike most crypto exchange markets where you can only trade crypto-to-crypto pairs.

  • It is only possible to make deposits and withdrawals using fiat currencies.


Cryptocurrency CFD Trading Process


If you have traded forex or CFDs on any popular MT4 platforms, you should have no trouble understanding the cryptocurrency CFD trading process. They are generally listed like any other CFD instrument on the platform. 


Trading cryptocurrencies on a CFD platform like https://dotbig.com/ involves technical (based on market statistics) and fundamental (trading based on live economic news) analysis, as well as balanced trading psychology and a good set of risk management tools. Risk management is critical because cryptocurrency pairs are among the most volatile assets on any CFD trading platform. Prices move in tens and hundreds of currency units a day, unlike currency assets with smaller movements in decimal percentage points or volatile commodities such as oil, whose assets register movements of single digits per day.


Take a look at the image below to see how technical analysis and indicators are used on the chart to identify trends and patterns.


Regarding fundamental analysis, news coverage is essential for price movements in major cryptocurrency CFDs. News sources for CriptOS include some of the leading websites, cryptocurrencies, or social networks.


There are two things to keep in mind when it comes to crypto news. First, there is no economic calendar to work with, so you can't really tell when the news that moves the market will be released. Second, the kind of crypto news that moves the market focuses on a few topics: adoption, favorable statements from regulators, and integration into a major market.


Pay Attention to Price Correlation


You should also pay attention to the correlations. For example, Bitcoin Cash ABC and Litecoin were built on the structure of Bitcoin and are essentially Bitcoin clones (also known as altcoins). Therefore, Bitcoin tends to drag Litecoin prices in whichever direction you go. Take a look at the two charts below for BTC / USD and LTC / USD, taken in the same time frame.


Do you see any similarities in these two charts? You can see that the picture of LTC / USD mirrors that of BTC / USD, showing that Bitcoin and Litecoin have a strong correlation.


Conclusion


These are the basic elements that are needed to trade cryptocurrencies on forex or CFD platforms. Pay attention to the news: Anything you hear about attempted hacks or changes in regulation will affect cryptocurrency movements, as news about forks. You should also pay attention to the correlations at prices between similar cryptos, such as LTC and BTC. Remember, DotBig offers access to CFD trading on all major cryptocurrencies.


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