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Ripple CFD – Full Guide
CFD or rather Contract for Difference is a mode of trading in which you buy or sell units expecting them to either rise or fall in price. The difference between the buying and the selling price is usually your profit if the instrument you have bought moves in your favor. You get the multiples of the amount of CFD units you have bought as profit. On the flip side, you will make a loss for every point that moves against you. your losses can even leave you on a negative balance after eating into your deposit.
The Ripple currency (XRP) aims to facilitate faster and cheaper payments across the world on the blockchain technology. It works on the Ripple network that allows easy transfer of currencies (both digital and fiat) to be transferred globally. XRP acts as the gas the payment method within this network.
XRP is the currency used for all transactions in the Ripple payment network. One of the top five cryptocurrencies in the world in terms of market capitalization, XRP is widely traded on a range of global exchanges.
You can purchase XRP using either fiat or other cryptocurrencies such as Bitcoin or Ether. Option to trade cryptocurrencies using CFDs, CFD stands for Contract for Difference. Cryptocurrency CFDs allow you to speculate on price fluctuations and use leverage. Keep in mind though that when trading using CFDs you do not own the cryptocurrency, but only the right to receive the difference of the current from the future price.
What is Ripple CFD?
A Ripple CFD is more or less the same as that of other units or instruments such as shares and stocks. It is ideally agreeing to exchange the difference in price between the time you open an XRP position and when you close it. The difference between trading CFDs and buying the actual coin is that with CFDs, you never own the coin and never go through the long and strenuous process of buying the coins from an exchange and placing them in a wallet.
XRPs CFDs work much the same way as other commodities only that you never own the commodities when trading CFDs. When you buy a stock or a commodity from the stock exchange, you become the owner of that commodity. You can liquidate the stock or commodity any time you feel like whether it has made a profit or not. CFDs are quite different.
An XRP CFD is purely an agreement between you and the provider of that CFD. You do not have any ownership rights to the ripple you get through CFD. You just have a contract in which you get the difference in price in cash of your opening and closing trade. This means that you can benefit from ripple coins without ever owning them and without spending any of your money. Remember, though, you can also lose your money if the CFD goes downward. In such a case, you will have to pay the deficit that arises from your trading positions to the provider.
CFDs give you an opportunity of trading different instruments or derivatives using just one account. Derivatives are stocks, indices, currencies or commodities that you decide to buy. Once you decide to trade CFDs, you do not have to have the full value of the desired instrument or derivative. You can buy or sell a fraction of any particular derivative depending on your analysis of the market. The good aspect with derivatives is that you can earn money without spending any in particular by trading on the margin. You can even buy CFDs valued at more than you actually have.
How an XRP CFD Works
XRP CFD as mentioned earlier works like most other derivatives listed on various trade platforms. After depositing the minimal amount required in a trading platform, you then observe the behavior of the coin in real time. You can set the time depending on your risk appetite to as low as just two minutes.
After observing the trend of XRP, you can then decide to either go long or short depending on the direction you feel the coin will head. Let’s see the difference between short and long selling.
You can short basically any instrument or asset, XRP included. While most traders buy and hold on to their assets with the hope of those assets increasing in price, short-term traders looking for quick profits gamble or take bets with these derivatives.
One way of doing this is by short selling. This type of selling can only occur in a margin account and involves selling what one does not really own with the expectation that the currency’s price will depreciate. If the price depreciates, you can then use the money you acquired to buy back the unit at a lower price.
Your profit is the difference between the selling price and the buying priceless trading expenses and commissions. In a real-time, trading platform, you can see the actual moment of the derivatives and your profit is credited to your account in real time. If for instance the price of your derivative instead goes higher than your selling price within the time you set, then you lose everything you had placed for that particular transaction.
This is basically the opposite of short selling. Instead of selling a derivative, you instead place a buy order in your trading platform and set the time period for your position and hope that the price of your CFD Ripple remains on the upper side of your position.
If after the time you set elapses the price of that derivative is still above your buying position, then you earn the profit margin you set. If the price goes lower than your set position, then you lose everything you had invested in that particular transaction.
Like other derivatives, you can buy and sell XRP on margin. This means that you can borrow money you do not have to place a trade and then pay the difference when you make a profit. This margin is defined by the Ripple CFD brokers. Your profits get magnified if the trade goes in your favor. Remember, however, if the position you take goes against you, then you incur the magnified losses that result in that particular trade.
Best Ripple CFD brokers
Plus500 is a full-service online financial broker catering to retail traders. It provides trading in CFDs across a range of financial markets. Plus500 is a regulated financial services entity in the United Kingdom, Cyprus, Australia, and Israel, now offering cryptocurrency alongside its other offerings.
The CFD trading platform of Plus500, founded in 2008, is provided by Plus500CY Ltd., which is a company based in Cyprus and has its headquarters in Limassol. Plus500 offers CFDs on shares, commodities, indices, forex, etc. As far as cryptocurrency trading is concerned, Plus500 offers CFDs using the following pairs:
- BTC/USD (Bitcoin)
- ETH/BTC (Ethereum / Bitcoin)
- BCH/USD (Bitcoin Cash)
- ETH/USD (Ethereum)
- NEO/USD (NEO)
- LTC/USD (Litecoin)
- XRP/USD (Ripple)
- MIOTA/USD (Iota)
- XMR/USD (Monero)
- EOS/USD (EOS)
A certain amount can be added or taken away from your account if you hold your position open after the market closes for the day. This is done to cover the expenses or profits of associated funding. When holding a position open overnight, some corrections will have to be made hence the amount.
Naturally, if you hold your position open during a weekend, these amounts will be higher. Plus500 offers two account options, consisting of a demo account, which has no time limit and can be opened free of charge, and a live account that requires a minimum deposit of $200.
The leverage offered on indices is up to 1:300 and for commodities like gold, silver, and oil it’s up to 1:300. Trade Exchange-Traded-Funds (EFTs) have the lowest leverage of the CFDs at up to 1:100. A key
eToro is a global social investment marketplace for people to trade currencies, commodities, CFD stocks and indices online. Their aim is to give new and experienced investors the opportunity to benefit from the collective potential of their diverse trading community in a simple and intuitive manner. eToro was founded in 2007 and as of November 2015 has over 4.5 million users in over 170 countries. The WebTrader web-based trading platform was launched in 2008.
eToro also provides a range of responsible trading features such as pre-set leverage settings to help investors to easily calculate their risk. When you copy other traders you’re also restricted to allocating a maximum of 20% of your total capital per trader, hence protecting your equity by limiting your exposure.
There are no costs or management fees for using the eToro social trading network and investment platform. Because eToro also acts as your broker, they solely make their revenues through the broker spreads of the instruments you’re trading on (i.e. the difference between the Ask and the Bid prices). In addition, eToro, just like other brokers, also charges overnight rollover fees (or credits) for any trades positions left open overnight and over the weekend.
Over the years, the minimum deposit had already been raised, going from $50, to $100, to $200, to $400, based on country and payment method.
IQ Option offers the widest range of trading indicators and instruments to help you trade, analyses and manage your cryptocurrency investments to get the best results. It offers a very wide range of cryptocurrencies you can buy, including Bitcoin, Bitcoin Cash, Ethereum, and Dash.
What are the Advantages of Ripple CFDs?
Like other CFDs, Ripple CFDs advantages are less similar to other derivatives. Let’s go through some of the advantages you would get trading Ripple CFDs.
When trading CFDs, you do not have to pay the full value of Ripple or any other derivative for that matter. You can just buy a fraction of that coin. This is what is referred to as margin trading. this type of trading allows traders to leverage their positions enabling you to maximize your investment by buying more than you normally would.
Leverage trading allows you to deposit only a percentage of the investment required. If one coin costs $10, with a leverage of 10%, you can buy 1000 CFDs worth $10,000, but only deposit $1000. That is 10% of $10,000. Supposing this coin’s value rises by $5, then your investment becomes $15,000, so you make a profit of $14,000, less any other transaction charges.
Ripple has recently shown how, like other digital currencies, it can be volatile. This means that it is consistently changing in price, sometimes going very low then rising back up. If you can manage to place a trade at the right time, then you’ll set to profit a lot from this volatility.
XRP is the third most valuable crypto asset after bitcoin and Ethereum. Last year, this coin rose by a staggering 2000% after banks showed signs of using it for global payments. It then fell down by more than half. Comparing this asset’s volatility relative to bitcoin, Ethereum and other stocks and commodities, XRP is almost at 200%, followed closely by Ethereum. If you can take advantage of the massive movement in price, you can make some good money if the transaction you place moves to your favor. Remember however that it can also move against you.
Get Paid in Your Native Currency
XRP is Ripple’s native currency. When trading Ripple CFDs, you get paid in your country’s currency. the transacting organization buys XRP from a local liquidity provider and then send you the XRP as payment. These coins are converted directly by your receiving bank and your account is credited with your local currency. You do not have to go through numerous exchanges and procedures to liquidate your cash.
When you trade Ripple CFDs in various online trading platforms, you can get paid in dollars then convert those dollars to your local currency. The process of trading and withdrawing your profits is usually very straightforward and easy. You can even get your profits wired directly to your local bank.
Ripple CFDs are Good for People that Know Nothing About Ripple
Unlike buying and keeping coins where you have to understand the whole Ripple system and how it works, trading in Ripple CFDs does not require you to know anything about Ripple. If you are just in it to make quick short-term profits, you just need to have knowledge of how to read the trends in trading platforms. You can then buy or sell depending on your analysis of the market movement and make your profits.
Make money off of changes in coin prices without the hassle associated with directly trading a coin
When speculating on cryptocurrencies, you have to find a suitable coin, an exchange that lists that particular coin and find a suitable wallet to keep your coins after you complete the long process of buying the coins.
You may not be in a position to take advantage of the rapid changes in coin prices considering the long process it takes to acquire most cryptocurrencies. And even when you have them and there is a sudden hike in price, it will take you a long time before you are able to find a buyer and sell when in your wallet.
With CFDs, you buy and sell in real time. You do not have to look for a buyer anywhere since you don’t even own the coins but are only under a contract. Once there is a sudden hike in price, you profit instantly.
Disadvantages of Ripple CFDs
Despite the numerous advantages of trading CFDs and the attractive opportunities of making quick cash, there are also a few disadvantages with this type of trading. Let’s go through some of them.
Overnight Fees in Trading Platforms
If you take a position that will run for more than 24 hours, some platforms charge an overnight fee that will eat into your profit. the rate or percentage depends on the platform you are using.
Lack of Ownership
You do not own the assets when trading CFDs. You are only entitled to the contract and the ensuing profits if the position you take moves in your favor.
Inflexible Leverage Levels
While leverage trading gives you an opportunity of making substantial profits using credit, it can also go against you and lead to serious losses. It is a two-edged sword. For instance, since the CFD providers decide the margin levels for each market they can change these levels at their own discretion.
It is up to you as a trader to deduce methods of countering such situations. You may be forced to increase the funds in your account if such a situation happens to avoid being closed out of a trade.
Short Positions Expose Traders to Unlimited Losses
As we identified earlier, a short position is when taken when you as a trader think that the price of a given asset is going to fall so you benefit from the decline. If you take such a position and it goes against your prediction, then you are bound to make losses as far as the price of that particular asset rises. This concept also applies to Ripple. If you take a short position and the price of Ripple starts going up, you will cover up for the difference. This can lead to significant losses.
While this may seem like a less significant demerit, engaging in excessive trading can be detrimental. You may spend a lot of hours trading due to easy access and low capital requirements but end up getting nothing. The best way of trading CFDs is carefully analyzing the market, then setting your favorable trade and having an exit strategy. Do not be greedy as the market can suddenly swing against you.
In order to carry out a margin trade and to leverage your asset, you will require a collateral to act as a security in case the position you take goes against your prediction. This collateral requirement may force you to a margin call if there is insufficient security in your account to support an open position.
In a Nutshell
We’ve seen how lucrative Ripple CFDs can be especially due to this coin’s volatile nature. However, as much as you can make a lot of money you may also make losses. Trading in CFDS is a risk and you should only invest that amount of money you would be willing to lose.
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