Bitcoin CFD Trading – A Simplified Guide
With the volatility and popularity surrounding Bitcoin, it’s no wonder that Bitcoin CFD trading has become one of the most popular trading opportunities in recent time.
But there’s more to it than simply opening a Bitcoin CFD trading account and making lots of money. This is a guide dedicated to trading Bitcoin; what it is, how to get started, the benefits & risks involved, which brokers to trade with and more.
How Do You Start Trading Bitcoin CFDs?
In order to start trading Bitcoin, you will need to open a CFD account with a specialised Bitcoin broker that offers Bitcoin on their trading platform. We’d recommend trialling a couple of demo accounts with various brokers before committing to one particular trading platform to ensure you like their trading platform, the costs involved etc. Finally, before you start trading Bitcoin, or any other financial market, please ensure you fully understand all the risks involved (more on this below).
Compare The Best Bitcoin CFD Brokers:
Simple Trading Platform
Litecoin, Monero, NEO, Stellar, TRON
Low Trading Costs
Ether, Dash & Litecoin
Cash, Litecoin & Ripple
What Is Bitcoin?
Unless you’ve been at sea for the past 12 months or living in a cave, you’ve probably heard of Bitcoin and/or cryptocurrency. Bitcoin (and other cryptocurrencies) are seen as the “new gold” with investors and traders flocking in to trade one of the most exciting investment opportunities in recent years.
Put simply, Bitcoin is a cryptocurrency, a unique subset of digital currency that was designed to act as an alternative means of exchange to fiat currencies (USD, AUD, EUR etc.) Bitcoin was invented by Satoshi Nakamoto in 2009 and is the largest cryptocurrency in the world.
The Bitcoin transaction process is conducted via online peer-to-peer technology (using cryptography) and is managed by dedicated Bitcoin servers. Unlike ordinary currencies like the Australian dollar or US dollar, Bitcoin is a decentralised function, i.e. it is not controlled or regulated by a central government or authority like most other currencies.
How To Choose a Bitcoin Broker – 5 Key Considerations
There are many important factors to consider when looking to find a CFD trading platform to trade Bitcoin on. Below are some considerations to think about before committing to a Bitcoin CFD broker.
Use a regulated CFD broker when looking to trade Bitcoin (or any other financial market for that matter). The governing regulator, such as the Australian Securities & Investments Commission (ASIC), develops rules and regulations that protect the integrity of the market, as well as the interests of traders. Do not trade with a broker who is not ASIC-regulated.
CFD providers make their money in various ways; namely through spreads, client losses, commissions and overnight financing costs. You should make a conscious effort to research the trading costs of each broker before committing to one, as the less you get charged, the better chance you have of making a trading profit.
- Spreads: the wider the spread, the more a broker is charging you to trade. The tighter the spread, the less they are charging you. Please find a broker that charges what you consider to be a fair spread cost.
- Commission charges: most brokers will only charge commissions on stock CFD trades – but please check with your broker before you trade Bitcoin.
- Overnight financing charges: how much will a broker charge you to keep a Bitcoin position open overnight? This is a common charge that isn’t explained very well by brokers so please ask.
3. Range of Markets
There are some 1,400+ cryptocurrencies on the market however you will probably only have your eye on a couple of them. Please ensure that your broker of choice actually has Bitcoin and/or other markets that you wish to trade on their platform.
4. The Trading Platform
Each CFD provider’s trading platform is different so you need to be comfortable with their trading technology before you commit to it. We’d recommend test-driving a broker’s platform by opening a demo account with them. Also download their trading app and have a play around. Only then will you know what trading platform you like.
5. Customer Service
Remember that Bitcoin trading is 24/7 so you should have access to customer support at all times. There is nothing worse than trying to open or close a trade, not being able to and then receiving no help when you call up your broker.
Being able to contact your broker is incredibly important, but also them being about to answer your questions accurately and openly is very telling. Do not trade with a broker that cannot answer basic questions in a professional manner.
The Benefits Of Trading Bitcoin CFDs
- Go ‘LONG’ and ‘SHORT’Trading Bitcoin (and other financial markets) using a CFD platform means that you have the ability to short (sell) the market as well as go long (buy). For instance; you think that the price of Bitcoin will decline overnight – this means you can open a SELL trade in anticipation of it falling in value. If indeed the price of Bitcoin does fall, then you should make a profit on that trade.
- Trade Bitcoin 24/5As cryptocurrencies have no regulated exchange, like a stock market for example, they are effectively open 24 hours a day, 7 days a week meaning most brokers will allow you to trade Bitcoin and other crypto’s 24/7.
- Leveraged Trading ProductIf you trade Bitcoin via a CFD platform, you will be trading on leverage (or margin). This means you only need to deposit a small amount of money onto your CFD account in order to trade much larger position sizes. For instance, if Bitcoin was valued at $7,000, then you might only need to place $2,000 – $3,000 onto your trading account to open a trade. This represents only 20-40% of its total value. More on leverage here.
- VolatilityTraders all around the globe are attracted to trading Bitcoin using CFDs as crypto’s can be extremely volatile markets to trade. Volatility can appeal to some traders as there is massive potential to make a lot of money very quickly (losses can also be magnified so be careful).
- You do not own the Physical Asset (Bitcoin)When trading Bitcoin via a Bitcoin CFD platform you are only speculating on the price movement of Bitcoin. You do not own any Bitcoin. As you do not own any you do not have to worry about ownership costs and trying to sell the Bitcoin etc.
The Risks Of Trading Bitcoin CFDs
Trading Bitcoin using CFDs means you are trading a leveraged product. If you speculate incorrectly, your losses can be magnified, resulting in severe losses. Please ensure you understand the risks involved before opening a live trading account (please trial a demo account first).
Volatility within the Bitcoin market is one reason why traders are attracted to trading it. However, it’s not as easy as that. Volatility can wipe out your account in seconds if the market goes against you. Please be aware of the risks involved with trading Bitcoin via a Bitcoin broker.
Our Preferred CFD Bitcoin Broker
TD365.com – one of, if not, the world’s best value CFD provider.
TD365 Best Low-Cost CFD Provider
- Industry-Leading Tight, Fixed Spreads: TD365 offer some of the lowest spreads going –cryptocurrencies included.
- Minimum Deposit: there is no minimum deposit with TD365 (although you will need funds in your account to trade).
- No Commission Fees: you will only pay a spread charge to open a crypto trade with TD365 – no commissions apply
- Easy-To-Use Trading Platform: trade using their in-house CFD trade platform, CloudTrade, fast, effective and user-friendly