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Buy and Sell or Trade? The Advantages and Disadvantages of CFDs in the Crypto Market

Gilbert Perry

ByGilbert Perry

Dec 16, 2021

The volatile nature of cryptocurrencies causes a demand for trading instruments flexible enough to help traders take advantage of both bearish and bullish conditions. Contracts for Difference, or CFDs, are popular with that respect, but just like other assets, you should be aware that there are both advantages and disadvantages to using them.

For the time being, Bitcoin continues to weaken, along with the broad altcoin market, which is why now is a proper time to discuss several aspects related to crypto CFD trading.

Prices fall – short-selling is a good approach

December disappointed thus far in terms of crypto market performance, as many were expecting it to be a positive month, based on seasonal patterns. That’s not the case and the weakening momentum, on the back of a stronger USD as well as poorer risk sentiment since central banks withdraw stimulus, incentivize market participants to trim their exposure.

High uncertainty – prices can move either way

Although crypto adoption took an important leap forward, and today institutions and personal traders are heavily involved, this did not negate the uncertainty associated with any emerging industry. Digital assets are still a new concept and until there is a global regulatory framework alongside the broad usage, price cycles could remain volatile, with potential trade opportunities for sellers and buyers.

Leveraged trading – balancing with risk and portfolio management

Using CFDs also involves margin trading, which can enhance returns, but also increase risk. Combined with the elevated volatility in crypto, it is important for traders to balance things out using risk and portfolio management.

InvestingCrypto is a CFD brokerage covering cryptocurrencies, offering traders the ability to buy or sell a lot of popular tokens. It has been in the industry for a decent amount of time and continues to attract new customers constantly.

trading Bitcoin and altcoins
Source httpspixabaycom

 

Also, InvestingCrypto is not only about cryptocurrencies, since traders can benefit from FX, shares, indices, and commodities. By diversifying among various asset classes when trading CFDs, users can keep their exposure balance and not get bumped out by a single trade.

Asset diversity is an important feature, as well as tight trading costs and execution. InvestingCrypto doesn’t make any compromises when it comes to these aspects and that’s the main reason why it benefits from so many positive reviews online.

CFDs – instruments designed for short-term trading

Ultimately, you should know that CFDs are instruments well-suited for trading short-term. It is more difficult to keep trades open for weeks or months unless the price moves impulsively in your favor because overnight swaps are charged every day and that cost can add up and erode the bottom line of profit.

Aware that short-term trading is more about timing and accurate trade placement, InvestingCrypto offers various market analysis tools, helping customers make difficult decisions as prices unfold in real-time. Only well-informed and educated traders have the ability to spot great trade setups and use their knowledge to squeeze out potential.

Gilbert Perry

Gilbert Perry

Gilbert Perry, a proficient contributor at Big Trends Signals, combines his rich trading experience and excellent writing skills to deliver comprehensive guides and detailed online trading reviews.

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