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CFD Trading: Pros and Cons.
lhorgic
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2024-05-01 22:23:00
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Hello friends, welcome back to this space, am super glad you came back again to check what I've prepared.I trust you had a great time going through the last publication. Well today's experience won't be any different as you will also be enjoying today lesson
We would yet look into the topic we discussed in my previous post. We would be looking at the pros and cons of CFD trading. This would help equip us and help us get the best of this kind of trade. Let's get into it right away.
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• **Leverage:** Leverage is one of the key benefits of trading crypto CFDs. Leverage is an edge given to a trader to open a large position with less capital which thereby gives him the opportunity to scoop in massive profit that he wouldn't have if he were to go the normal way. For example, with $100, a trader can open a position worth $1000 when he uses a leverage of 10:1.
• **Low Transaction Fees:** Crypto CFDs are known to also have lower transactions cost especially when compared to the traditional way of outrightly buying a coin and holding it. There are a lot of fee attached to trading, which includes buyers and takers fee and even Blockchain transaction fee which is charged on transit of asset to wallets. All of these fee are also captured in CFD trading but then it lower because they have being built into the spread.
• **Higher Liquidity:** Another major advantage of crypto CFDs is the liquidity that traders enjoy, they could open and close a position immediately and at will without any for of delay because the market itself is liquid moreso, there is need for confirmation from the Blockchain as asset are not actually delivered since they are not bought in the real sense.
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• **Shorting:** CFDs allows for short selling, it means a trader do not only profit from buying and holding and assets till it appreciates but he can also short (sell) and make profit when price are falling in the market. Shorting is actually one of the ways to make massive profit in a bear market. In a nutshell, a CFD trader make profit both in the bull and bear market.
• **Global Market Access From One Platform:** CFDs are traded all round the clock, this means traders have access to the market whenever they want and that because most brokers offer their product on major market where investors all around the world come to transact and do business.
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• **Volatility:** Volatility is something we can't take away from the market be it crypto or forex. We just have to deal with it. The volatility that comes with trading CFDs is very high and adequate care needs to be taken to be safe from the effect of this volatility. It's is such a risky terrain.
• **Leverage Risk:** The use of leverage is a double edged sword like I've always say. While leverage could earn you fortune from just the little you put in, it could also empty your account if adequate care is not taken. The use of leverage should be moderate, excessive use of leverage is a sign of greed which would eventually expose you to bigger risk than you can bear.
• **Regulatory Restrictions:** Normally, trading of crypto is not completely regulated even those we have bodies that checkmate crypto activities from time to time but then when it comes to CFDs, it's has so many regulatory restrictions.Many countries around the world doesn't seem to buy the idea as CFD is not the regular kind of trade.
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• **Counterparty risk:** This is a risk that traders or investors are likely to suffer when they fall into the hands of a dubious and dishonest CFD broker. You can identify such by their act which includes inability to act accordingly to agreement nor acting in the best in interest of the trader. This is the reason why one should look out for a good broker to
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I believe by now you have a very good knowledge of what contract for Difference (CFD) means coupled with it advantages and risk. Having learnt all of this, one need to be careful so he doesn't shoot himself in the leg.
There you go friends.I would love to wrap it up at this juncture. I want to believe you've gotten so much from this piece. As my usual custom is, I would always encourage that you DYOR to be sure of every financial step you would want to take as I won't be liable for any form of loss encountered by you.
Feel free to share with me your thoughts in the comment section. Thanks for your time once again. Gracias!
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**Disclaimer: This post is made as an education and not investment advice. Digital asset prices are subject to change. All forms of crypto investment have a high risk. I am not a financial advisor, before jumping to any conclusions in this matter please do your own research and consult a financial advisor.**
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Regards
@lhorgic♥️
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