How to start trading Crypto with CFDs in 2020
While trading has never been for the faint of hearted, often taking a patient mind and attention to detail to generate the highest profits, this year has certainly been a challenge for even the most advanced traders. With major stocks rising and falling on a daily basis, coupled with huge yearly events from lockdowns to the US Presidential Election, there has never been a more interesting time to get into CFD’s, and what better place to start than with cryptocurrencies, when Bitcoin has managed to overcome a difficult year to be at its’ highest price in nearly 3 years.
When people talk about buying Bitcoin and various other cryptocurrencies, the attraction of a decentralised currency with anonymity has its obvious advantages. However, in recent years, major trading companies have moved into the space with an alternative and equally attractive proposition, which is that while owning 1BTC might be a solid investment, the ability to bet on the position of it over the course of a year or to short it when you think the price might be over-inflated can all be done without the physical ownership, not to mention the added security of not needing to worry about a digital wallet or the threat of someone stealing your hard-earned money. So just how do you start CFD trading? – here are a few simple pointers to understand the game:
- Firstly, it’s important to note that CFD’s (Contracts for Difference) are a way for investors to trade the financial markets, both for and against, while remaining tax efficient and with potentially only a small amount of start-up capital.
- You don’t need a large amount of investment to be able to make a large amount of money back. If you decide to open a CFD position in Bitcoin that is ahead of the current market value, every time the currency moves up a point, you can get paid. This means that you don’t have to buy a large amount of BTC to make a profit, nor are you unable to exit quickly if you see the value going down.
- CFDs can be a great way to protect your assets without the need to liquidate them if things start to go wrong – in other words ‘hedging’. If you own 10BTC and the price starts falling, you might insure yourself by opening a ‘selling’ CFD position of 10BTC, meaning that you offset your potential losses for just a small fraction of the cost. This also allows you to ride out any market volatility without the need to sell your actual cryptocurrency.
- CFD Trading and Spread Betting are currently exempt from UK Stamp duty, whilst spread betting is also exempt from Capital Gains Tax, but is only eligible in the UK and Ireland, not worldwide like Contract for Difference. While the argument of cryptocurrencies might be that the anonymity allows you to be the same, trading CFD’s means there is no risk of tax investigations or legal implications, not to mention that most major trading sites have access to a huge amount of different markets that you can dabble in at any time.
While there are a multitude of other benefits to using CFD’s rather than physically buying into a product or cryptocurrency, the ability to protect current investments and the versatility to change your mind and execute it at just a moment’s notice is unparalleled. Whether you are a crypto-fan or just someone interested in diversifying your portfolio, check out any of the major trading sites for free demos and to learn more.
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