What is Cryptocurrency Trading?
The cryptocurrency trading market is growing and is anticipated to grow to a trillion-dollar industry. Due to the rising demand for digital payments, and now cryptocurrency can be traded through CFD’s (Contract for Difference). Crypto trading is very similar to trading forex; they both exchanging currencies. Crypto has very different influences from more well-known markets such as stocks, forex, or indices because they are a new asset and the markets are not as established.
How to Trade Cryptocurrency
There two different ways you can trade cryptocurrency. The first way is directly on a cryptocurrency exchange using digital currency that you have purchased and transferred to the exchange platform. Secondly, through a broker using CFD which are contracts for difference. When you trade using CFD’s through a broker, you are not trading real cryptocurrencies. When you place a trade through your broker using CFD’s, you are just purchasing a contract for the current price. Both ways have pros and cons, and if you are going to trade cryptocurrencies, I highly recommend you educate yourself on which method best suits you. I will go over a brief explanation of the differences.
The cryptocurrency market never sleeps. It is available 24/7 through cryptocurrency exchanges. Some brokers offer weekend crypto trading. When you trade on cryptocurrency exchanges, you are using bitcoin to trade directly, and you can not use leverage as you could with CDF’s broker. One of the main benefits of trading directly on crypto exchanges is it grants you the ownership of the currency you are trading. You then can transfer profits to your wallet and hold the coins until it increases in value. Many cryptocurrency exchanges are not built for beginners and can be very intimidating for new traders. Also, often the customer support is not available or easy to reach compared to forex brokers. Most forex brokers are offering the option to trade the leading cryptocurrencies, such as Bitcoin, Litcoin, Ripple, Etherum, and Dash.
Benefits of Trading Cryptocurrency with Brokers
- User-friendly trading platforms
- Better Customer Support
- Brokers are highly regulated
- Brokers usually offer leverage on all currencies
- Most brokers accept multiple forms of payment, including credit cards, PayPal, debits cards, skrill, etc.
- Generally an easier withdrawal process
Disadvantages in Trading Cryptocurrency with Brokers
- You are trading CFD’s and do not own the currency
- Cost of spread is usually higher with cryptos
- Some Brokers charge a commission on cryptos
- Not every broker supports cryptocurrency on the weekends
Benefits of Trading Cryptocurrency on Exchanges
- Exchanges are open 24/7
- Generally, offer lower spreads or commissions
- You own the coin and can transfer it to your digital wallet
Disadvantages of Trading on Exchanges
- Your funds are not as secure as a broker
- Deposit and withdrawal process are usually more complicated
- Can lack in customer service
- New to the market
- Exchanges have previously been victims of cyber attacks
Before You Start Trading
Yes, there are great opportunities for you to make money in the market place. But I highly recommend that you take the time to educate yourself on how you can benefit from the growing currency industry. I also advise that you do not jump in the market place without doing your research and having knowledge under your belt. There is lots of information and platforms out there, and I caution you to be aware of where you obtain your information.
Developing the skill of trading is like an art and challenging to learn on your own or from free material you will find online. I recommend that you source an education provider to help you master the skillset of trading and have a community to support you on your learning journey.
**Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. This information is for research and education purposes. It is not a recommendation to invest or trade cryptocurrency or trade forex
**Risk Warning: Trading leveraged products such as Forex, CFDs and Cryptocurrency’s may not be suitable for all investors as they carry a degree of risk to your capital. Please ensure that you fully understand the risks involved, taking into account your investment objectives and level of experience, before trading, and if necessary, seek independent advice.