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Ethereum CDF Trading Guide
Ethereum is a decentralized blockchain network used to run smart contracts. Ethereum tokens are referred to as Ether coins and abbreviated with the token symbol, ETH. With the introduction of Cryptocurrency to the list of tradeable assets on CFDs brokers, traders can now capitalize on the volatile nature of cryptos and speculate on the rise and fall of the value of different Cryptocurrencies. Example of such a cryptocurrency is Ethereum. This made it possible for traders to also enjoy the thrill of at Ethereum CFD trading.
CFD stands for “Contract for Difference.” This is a contract which serves to exchange the disparity in the value of a financial instrument which in this case is Ethereum from the time at which the contract is opened to the time at which the contract is closed.
Traders and investors are attracted to the phenomenal rise and fall in the value of Ethereum which paves way for the prospect of unparalleled returns. However, since CFD trading is prone to high fluctuations in price, you should only invest money you can afford to lose. Please remember that your capital is at risk.
What is Ethereum CFD?
Consolidated by a couple of fortune 500 companies, Ethereum trading has grown enormously since its inception in 2015, as an open source network when you purchase there, you are directly contributing to the network. On the other hand, when buying an Ethereum Contract for difference, you are basically predicting whether the value or price of Ethereum will rise or fall over a time frame, instead of buying Ethereum itself you are buying the contract.
Your profit or loss is determined by your prediction. If your prediction turns out to be wrong, you make a loss relative to the amount invested and if your prediction turns out to be right, you make a profit relative to the multiplier included in the contract, if any.
Using a leverage multiplier will significantly increase your profit by a margin as well as significantly increase the loss of your prediction turns out to be wrong. One must carefully consider whether to use a multiplier and how much of it to use. In ETH CFD trading, there is also the option of an automated stop loss order to minimize losses and take profit signals to close when a reasonable amount of profit is made.
How an ether CFD Works?
Since you do not own the Ether underlying asset in case of a CFD, you can only buy a contract based on the direction of the predicted direction you think the ether is going to go. If you believe the price of Ethereum will rise, you place a buy trade, if you believe the prices are going to dip down, you place a sell trade. The trade made in these cases are just contracts and it doesn’t give you actually right to owning the Ether coins sold.
For example, if your analysis shows that the price of ETH/USD is likely to increase. Instead of actually buying Ethers and keeping it in your wallet, you can place a leveraged Buy trade using a CFDs broker. This means you make money once the price of the Cross moves higher and you lose cash deposited into your account upon a downward movement.
Also since you are trading using a leveraged account, the value of each movement of price is calculated in PIPs.
How to Trade Ethereum CFDs?
To trade Ethereum CFDs you will need an account with a CFDs broker. The function of this broker is to help you with creating trading contracts that represents your trades.
In most cases the account you create usually have a sort of leverage on it, depending on the amount set by the broker as maximum leverage that can be chosen.
Upon creation and verification of account with your broker of choice, the next step is usually to fund your account with FIAT currency, depending on what the broker accepts as payment methods. Some broker accepts a deposit in forms of Cryptocurrency while others only deal strictly with FIAT.
Once the deposit is confirmed and your trading account is funded, you can then select the ETH/USD cross and place your buy or sell trades with or without leverage. After the trade is placed in the market by your broker, you then wait for the price to rise or fall as per your predictions. When the trade closes out in profit or loss, what you gain or lose is usually in Cash and not in actual Ethereum Tokens or Coin.
Below Are The Top Ethereum CFD Brokers
Plus500 is an Israeli based CFDs broker that started its operations in 2008. The broker was founded by 6 alumni of the Israeli Institute of Technology.
The broker had been known to be a leader when it comes to CFDs trading especially in Europe and it is also well regulated in most subsidiary countries. Plus500 focus on bringing a large range of CFDs trading opportunities to it clients. With an access to trade more than 2200 instruments which include cryptocurrencies, the earning potential on this broker platform is huge.
Plus500 is a well-known Ethereum CFDs broker which also happens to be listed on the London stock exchange. Apart from its notorious practice of avoiding paying the bonus to those who qualify for a withdrawal, the broker has proven to be trustworthy in other aspects of things and this is evident in its increase in stock price and the number of users.
What cryptocurrencies does it pair?
Plus500 allows the trade of the following Cryptocurrencies which are usually paired with the US dollar FIAT currency: Bitcoin (BTC/USD), Bitcoin Cash (BCH/USD), Ethereum (ETH/USD), NEO (NEO/USD), Litecoin (LTC/USD), Ripple (XRP/USD), Monero (XMR/USD).
A cross of Bitcoin/Ethereum(BTC/ETH) is also allowed for trading on the broker’s trading platform.
Plus500 allows several payment options which are namely;
- Debit or Credit Card
- Banks transfer via Barclays bank.
If you would love to pay using any other method, you are always allowed to message the customer care for more details on special exceptions.
Does it have fees?
Plus500 charges three types of fees.
- The first and major fee is the spread rate. This is charged in form of a price difference in the buy and sell price of the pair to be traded.
- The second fee is the oversight commission. This fee is usually charged on long(buy) trades and not on short (sell) trades. This is also referred to as the SWAP rate.
- Plus500 also charges a withdrawal fee after the fifth withdrawal for the month. This fee usually varies depending on the method uses.
Plus500 allows a minimum deposit of just $/€/£100 only. Ones you can afford to pay this, you are allowed to fund your trading account and can place trades in the market.
The leverage allowed by Plus500 varies a lot and it is usually determined by the trading Instrument the trader chooses. For example, the maximum leverage allowed for Cryptocurrency trading is 1:10, while that of forex trading is being capped at 1:300 and that of commodities at 1:152.
Etoro is an accomplished social trading platform launched in 2007. With headquarters in Cyprus and subsidiary offices in Canada, Isreal and the United Kingdom, the broker has dominated the social trading scene. Etoro has more than 5 million registered traders on its platform and the broker is well regulated across different countries’ regulatory bodies such as the; ASIC, MiFID, CySEC, FCA, and CFTC.
The main focus of Etoro is to arm traders with the knowledge of well trained and experienced traders in the field. By so doing, newbie traders can gain from copying experts’ opinions through the use of the platform.
Etoro is one of the earliest brokers to incorporate the trading of Cryptocurrency on its platform. It is a well-trusted broker and apart from its large minimum deposit requirements and its lack of service in some regions, the broker is well trusted.
What cryptocurrencies does it pair?
Etoro allows traders to trade the following Cryptocurrencies:
These Cryptocurrencies are only paired with the USD Fiat currency.
As a global broker, Etoro accepts the most basic forms of payment methods which includes;
Debit and Credit cards
Electonic wallets – PayPal, Neteller, WebMoney, and Skrill
Does it have fees?
Etoro is known to charge various forms of fee structures which are;
- Spread: The spread charged by CFDs brokers has been established as the running cost of the platform. This spread rate usually varies and it is usually deducted upon closing the trade.
- Inactive fee: This is a fee charged to an account that has become inactive for more than 12 months. The amount charged is usually $5.
- Overnight commission: This is usually a fee charged on long trades for carrying the trade over to the following trading day. This fee is usually tripled if the trade was carried over a Wednesday trading night. However, the fee is not being charged on non leveraged buy trades.
- Withdrawal fee: Etoro charges $25 on every withdrawal made by its traders and the minimum allowed to be withdrawn from the platform is $50. So it is always better to have a large sum to withdraw before making your withdrawals.
Etoro minimum deposit is one of the highest in the industry. The first deposit minimum accepted by Etoro is $500, which means if you are a small time trader just starting out; the platform might just not be for you.
Etoro leverage on its asset ranges from 1 to about 400 depending on the asset. Etoro doesn’t offer any leverage for Cryptocurrency trading, the leverage is usually set at 1:1 for Cryptocurrency trading.
Avatrade was founded in the year 2006 by a team of traders led by Emanuel Kronitz and Negev Shekel Nosatzkj. The broker has its main office in Ireland, Dublin and it boasts of having about 200,000 registered traders account with a yearly trade of more than two million. Avatrade has about 250 assets available for trading.
Apart from their long-term trading history, the broker is also notorious for taking a long period of time before processing withdrawal requests. If you are the type who has the patience or plan your withdrawal ahead of time, then Avatrade is a really good and well-trusted trader.
What cryptocurrencies does it pair
Avatrade allows traders to trade 13 different Cryptocurrency instruments which are crossed with 3 main FIAT currencies which are; USD, EUR, and JPY.
The Cryptocurrencies allowed on this platform includes;
ETHEREUM, BTC/USD, BTC/EUR, BTC/JPY, BITCOIN CASH, BCH/USD, LITECOIN, RIPPLE XRP, BITCOIN GOLD, BTG/USD, EOS
The payment options accepted by Avatrade are very much similar to what other similar prime CFDs broker make use of. Avatrade accepts the following payment options;
- Debit and Credit cards
- Bank Transfer
- Electonic wallets – PayPal, Payoneer, Neteller.
Does it have fees?
Avatrade does charge its client only two different types of fee excluding a deposit and withdrawal fee.
The two fees charged are;
- Overnight commission or SWAP rate: This is usually charged once a buy trade place overnight or wasn’t closed before the market opens for another trading day. This fee is not always charged on SELL trades. Avatrade Swap rate on a standard lot size is known not to exceed $5.
- Spreads: This is a unique form of price padding that is put in place by the broker. It is usually the difference in price between the asking price and bid price of a trading pair. This difference it usually set by the broker.
Avatrade has a minimum deposit of $100 in place for its standard account while that of the premium account starts at $250 only. The deposit can be made through any of the accepted payment methods. Avatrade also requires you to submit documentation before you commence trading on your account.
Avatrade is one of the few CFDs broker providing high leveraged trading to Cryptocurrency traders. The CFD offers a varying leverage depending on the type of financial instrument being traded. Example of such leverage variations includes;
- Cryptocurrency – Up to 1:20
- Forex – Up to 1:400
- Commodities- Up to 1:33
- Stocks – Up to 1:20
What are the advantages of Ethereum CFDs?
Leverage makes it possible for traders with a low amount of capital to take large trade sizes. This makes it possible for traders of all financial level to be able to participate fairly in the financial market. Using the leverage provided to buy or sell Ethereum CFDs gives the traders more chances to afford buying the Cryptocurrency in form of a CFDs, even if they don’t have up to the amount one token (1 ETH) of Ethereum cost.
Take Advantage of Ethereum’s Volatile Nature
Just like most major cryptocurrency tokens, Ethereum is well known for its drastic no warning large movement. This means the price can go against or in your favor in just a matter of few minutes. CFD trading makes it possible for traders to capitalize on these sharp price movements and the volatility and increase in trading volumes that comes with it.
Get Paid in Your Native Currency
Since most CFD brokers are usually trying to reach out to traders in their local settings, the urge to make it possible for these traders to withdraw or deposit in their local native currency using their own country’s local bank is greatly on the rise.
Ethereum CFDs are good for people that know nothing about Ethereum
For traders making use of technical analysis tools that involves the use if charting tools and technical indicators to determine the next phase in the price of an instrument. These traders don’t need to know the history or have any inclination of how the instrument works. So the CFDs Ethereum volatile nature is perfect for them.
Make money off of changes in coin prices without the hassle associated with directly trading a coin
Owning a Cryptocurrency coin can sometimes be really complicated. With the stress of having to exchange fiat to Cryptocurrency and also storing crypto on wallets, CFDs present a more straightforward approach to “owning crypto coins”. You just fund your brokerage account and you trade away.
What are the Disadvantages of Ethereum CFDs?
CFD industry is not highly regulated.
The CFDs industry is riddled with scam brokers as a result of low or no regulation. In other to enjoy true CFDs trading, you need to make sure all your trades are made with well established and regulated brokers.
Risky and can lead to loss of funds.
The financial market is well known for it maximum losing potential, leveraged trading makes the risk in more appalling. So you need to always keep this in mind whenever you are making a trade.
No uniformity in the price of Ethereum CFDs
Since these brokers are making use of different liquidity providers, the current prices of the CFDs will differ across brokers’ platforms.
You do not own the underlying asset
When you buy an Ethereum contract, you do not have the right to real Ether. All you just did is make a simple speculation on whether the price of Ethereum will rise or fall.
In a Nutshell
Ethereum CFDs is one of the best options when it comes to trading Cryptocurrency without being exposed to the risk of coin theft or devaluation.
As long as you made the right price predictions, you are sure to make money no matter the direction of the market. As profitable as CFD trading appears, it is very dangerous and also risky. Only invest money you can simply afford to lose.
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