With all of the hype around cryptocurrencies, traders are increasingly turning their attention to these exciting financial instruments as a means of speculating on the markets for financial gain. Most experienced traders will employ a diversified basket of financial tools and instruments combined with varied techniques, from share investment through to CFD trading, in order to pursue a strategy for profit-making over the longer term.
So if cryptocurrencies such as Bitcoin are of interest to you, then should you be looking to buy or trade them? Let's weigh up and assess the options.
When you buy or sell cryptocurrencies, you purchase the asset itself. As with any investment, you’ll need to buy and sell via an exchange, which requires you to create an exchange account and store the cryptocurrency in your own wallet. You’ll also need to put up the full value of the asset to open a position.
Physical ownership risks - When you buy a cryptocurrency you have to physically own it - something that brings its own risks if you need to rapidly sell because of market fluctuations.
Slow to acquire - There are several negatives about buying which must be factored into your plans. Firstly, they are slow to acquire. In order to buy or sell any cryptocurrency, you need to obtain user access to a financial exchange. To trade on an exchange, you must open a private user account. This can be a drawn-out process which typically take several days to complete. Why? Because at any one time a sizeable queue of would-be traders will be waiting to obtain manual approval on their applications. For most time-poor and motivated traders in today's digital age, this delay simply isn't desirable.
Limited trading access - Be aware too that limitations are likely to be placed on your account as a novice trader. For example, you'll probably only be able to deposit minimal sums initially.
Expensive to maintain - There will be costs to factor into your potential gains, as funding to and withdrawing from your account will typically incur fees. Some of the larger exchanges only use bank transfers for funding and withdrawal and these can take several days to set up and process, particularly over weekends and public holidays, limiting your ability to trade when your strategy demands that you make a movement. Traders can also find that they struggle to access the customer service when they need it. This is because younger exchanges typically lack the necessary infrastructure to deliver round-the-clock support service to their clients.
Let's now turn our attention to cryptocurrency trading. With this approach, you'll trade CFDs, to speculate on the changing price, or value, of your chosen focus market. The prices of each cryptocurrency are quoted in the usual currencies and the traders never own [HBP2] the underlying asset.
As CFD trading involves leveraged financial products, you can open a trading position with just a small percentage of the trade's complete value. This means that you can use just a small amount of your own capital to gain a sizeable exposure to your chosen financial market. This magnifies the impact of your trade in terms of rewards and risks. The secret of success, as ever, lies in learning as much as you can and taking your time to build up experience with manageable trades that do not overextend you.
Speed is another advantage of trading, as you don't need to operate via the exchange. This means you can get organised and geared up trade far more quickly with an account that takes just a couple of minutes to open and begin using.
There are excellent potential rewards on offer from becoming an experienced cryptocurrency trader, and this is one of the most enticing factors of all for ambitious traders.
Remember to seek out a trading platform with an intuitive user interface, rich and detailed market data with analysis tools, a vast learning resource to build your knowledge, a quick and easy deposit and withdrawal systems, full compliance with KYC anti-fraud measures and a 24/7 support team at your fingers.
Disclaimer: We do not give any recommendations on investment, make any decisions at your own risk.