Margin cryptocurrency trading
The most famous exchanges focused on trading using cryptocurrencies, give traders an opportunity to make transactions using such a tool as leverage, in a ratio of 1: 2 and reaching proportions of 1: 5. These are mainly exchanges like Kraken, Bitfinex and Poloniex. Leverage is financed by other exchange players, that is, margin investors.
At the same time, the interest rate for a particular transaction may be different, so the trader needs to pay it until the order is closed. As a rule, this process is automatic and is performed by the trading platform itself. Usually, for a trader, this carries the nature of the following costs: commission per trade, the difference with the price for buying and selling currencies (spread) and charging interest on the margin.
Does stock trading have positive sides? Of course they can be respresented in the following aspects:
- the ability to influence the development of certain trends in the market;
- transparency of information on ongoing transactions;
- a huge variety of choices in terms of finding the optimal cryptocurrency;
- the ability to resort to arbitrage;
- providing competent technical support through a chat with a specialist.
If there are so many advantages to trading on the exchange, what are the negative aspects? It must be admitted that there are also quite a few of them:
- there is always the possibility of a hacker attack on the server;
- unprofitable leverage rates (or lack thereof);
- inconvenient conditions for account verification;
- the presence of a “ceiling” on the deposit, the inability to invest more than allowed by the system.
Trading via brokers
Brokers who prefer to work via Forex give users the opportunity to trade on CFDs (Contract for Differences). In this case, a specific transaction plays the role of a rate due to the fact that assets are not exchanged here. In theory, such a mechanism should motivate brokers to offer higher leverage and lower fees. In practice, this rarely happens due to weak competition, so the indicators are close to the exchange ones. New hope team has a expert advisor for trading on Cryptocurrency via brokers, you can find it on “Bull” package.
Are the costs of a trader when trading through a broker comparable to similar exchange costs? The answer to this question will be a simple “yes”, since the trader spends money here according to the following criteria: bid (the price offered by the trader), ask (the price requested by the broker), spread (the price difference between these indicators), commission interest per transaction and swap (stable, a fixed rate for exchange transactions of assets).
Is there a benefit in trading cryptocurrency through a broker? Of course, there are positive nuances in such trade. Let’s consider them in more detail:
- if the broker already has an account, then there is no need to open a new one;
- an intuitive and more functional MetaTrader platform with a user-friendly interface;
- simplified procedure for conducting transactions for large amounts, where the market is less influenced by rates.
What are then the negative aspects of trading via a broker? They are indirectly associated with the formation of a stressful psychological environment for a trader and consist of such moments as:
- a trader will always have to play against a broker who acts as his permanent antagonist;
- the choice of cryptocurrencies provided by the broker may be more limited than at the exchange;
- the pricing process is difficult to track and harder to analyze due to the less openness and transparency of the data.
Transactions involving futures
You can trade futures on the standard Chicago Mercantile Exchange (CME) and on exchanges designed specifically for cryptocurrencies. These are the previously mentioned Kraken or Poloniex. Here there is an opportunity to buy and sell futures for bitcoins, which in a sense unites conservative and progressive-minded investors.
As with other types of trading, buying and selling futures can have benefits. Since these attractive factors are not entirely obvious to a newbie in trading, here are the main ones:
- there is no need to fear hacker attacks, all sites are well regulated and protected;
- opening an order will cost you as a trader a relatively low cost;
- those users who live in the United States or submit to the jurisdiction of this state can also participate in futures trading on these sites;
- this is an interesting opportunity for retail investors specifically from the US.
As in other types of trading, this type of trading will not do without drawbacks. The disadvantages of Bitcoin futures trading include the following:
- the threshold cost of entry is quite high;
- the leverage, on the contrary, is quite low (from 1: 2 to 1: 3);
- lack of privacy, the necessity to be “open” and not an anonymous user;
- low probability of gaining profit, liquidity when trading futures paired with bitcoins is low.
Does it make sense to get involved in cryptocurrency trading?
In conclusion of our today’s review on various types of cryptocurrencies and the peculiarities of trading with their use, let us summarize, but leave the choice to the reader. Beginners often think stereotypically: “Get it and hold it!” It is possible that for some this option will seem the only correct one, but the risk is sometimes justified. This question can be called an open question, because all traders may have different goals.
The common motive is to get rich, and everyone chooses and calculates the strategy individually and without relying on someone else’s experience or feedback. It is a fact that the dollar has depreciated relative to bitcoin over the past few years, which means that investments made in 2014 in cryptocurrency are already bringing tangible dividends to someone.
Of course, cryptocurrencies can go through periods of prosperity and degradation, and the duration of each of such periods can linger many years. However, with a reasonable combination of different trading methods (margin on the stock exchange, brokerage or futures), a competent investor has every chance to increase his profit and stay with his stable revenue even in times of crisis.