Trading in Bitcoin, or any other financial asset like crude oil, offers many opportunities. However, it can be difficult to navigate between brokers, spreads and sky-high management fees. That’s why managing your own investments based on price variances makes sense for many trading beginners.
Using the increasingly popular financial instrument called a CFD, or contract for difference, you can open a buy or sell position based on the current price of Bitcoin in a matter of seconds. Increased leverage is also available for CFD trading, giving you the ability to ‘multiply’ the relative value of your investment. However, this means that the relative gains or losses of your investment will also be amplified.
How do Bitcoin CFDs work?
Bitcoin CFDs are based on the price of Bitcoin at the time of purchase. When the Bitcoin price rises, so does the value of your buy position on Bitcoin. You can decide to stop your position and take the profit, or wait to see if the price will rise further. If the price dips, you can decide to stick out your buy position until the price recovers, or stop your position and take a loss to the capital you invested. Alternatively, if you believe the price will drop, you can open a sell position.