Today we are going to learn more about trading CFDs on cryptocurrencies on the IQ Option platform.
What is Crypto?
It seems that everyone knows the names of big cryptocurrencies – Bitcoin, Etherium, Ripple, Litecoin and so on. Many traders have already had some experience trading these currencies, or even purchasing them to hold on a long-term basis. But what is a cryptocurrency and what is the reason for their fall or rise in value?
Cryptos are digital currencies, which means that they don’t have a physical form like paper money. One main feature that most cryptocurrencies have is that they are not issued by a central authority, which, theoretically, makes them immune to any manipulation or government interference. Many cryptocurrencies are based on the blockchain technology where the security of transactions is ensured by confirmations. As cryptocurrencies get accepted as a payment method, their popularity as a secure, anonymous and decentralized currency grows.
As in any area, crypto trading has its own important rules and many terms that traders have to know in order to follow the market and understand the conditions well. Here are some of the most commonly used terms:
Order – an order placed on the exchange to purchase or sell the cryptocurrency
Fiat – regular money, issued and supported by a state (like for example USD, EUR, GBP and so on)
Mining – processing and decrypting crypto transactions, with the purpose of getting new cryptocurrency
HODL – a misspelling of “hold” that stuck around with the meaning of purchasing cryptocurrency with the intention to keep it for a long time, with the expectation of the price growing
Satoshi – 0,00000001 BTC – the smallest part of a BTC, it can be compared to a cent in USD
Bulls – traders who believe that the price will rise and prefer to buy at low price to sell at a higher value later
Bears – traders who believe the asset price will decrease and may possibly benefit from the asset value going down
How to trade CFDs on Crypto with IQ Option?
Cryptocurrencies on IQ Option are provided as CFD-based trading. It means that when traders open deals, they make a prediction regarding the change in the price of the asset. Traders may speculate on the changes in price, however, they do not own the crypto coin itself.
Here is a step-by-step explanation of CFD crypto trading on the IQ Option platform:
1. To begin trading on cryptocurrencies, you may open the traderoom and click the plus sign at the top to find the asset list
2. Find the cryptocurrency that you are interested in and choose the amount that you wish to invest in a deal
3. Note that cryptocurrencies are traded with a multiplier
The multiplier is an analogue of standard leverage. It provides you with the possibility of higher outcome, although it increases the possible risk of loss.
Based on your investment and the chosen multiplier, you will see the total trading volume of your deal. The trading volume is the amount which the outcome of the deal will depend on.
4. The last step before opening a deal is to set autoclose levels in order to adjust the deal to your preferred risk management approach
Note that a stop loss level of 50% is set to all deals automatically. It is possible to reduce this level (for instance, set it at 30%).
If a trader wishes to increase the level, they may utilize their balance funds in order to keep the deal open longer, even after the level of -50% is reached. A trailing stop loss may also be used in order to secure certain outcomes in case of a positive price change.
5. To open a deal, a trader will need to click the Buy or Sell button, depending on the expected price change: up or down respectively
When a trader clicks one of the buttons, the details of the deal they are about to open are available: the open price, investment, multiplier, volume, point value as well as the overnight charges. This way it is possible to double check all of the information before confirming the deal.
To make a decision regarding buying or selling of the cryptocurrency, traders may use technical indicators provided on the platform, or check out the “Info” section available for every asset in the traderoom.
This section displays the information about the current trend tendency (bearish or bullish), the summary of indicators’ signals and a lot more useful information that could assist a trader in making a well-informed decision.
You may also find the latest and most relevant updates about the asset in the “News” section. Though this section cannot replace a trader’s own analysis, it may help with forming a full picture of how the asset and the industry is doing.
NOTE: This article is not an investment advice. Any references to historical price movements or levels is informational and based on external analysis and we do not warranty that any such movements or levels are likely to reoccur in the future.
In accordance with European Securities and Markets Authority’s (ESMA) requirements, binary and digital options trading is only available to clients categorized as professional clients.
GENERAL RISK WARNING
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.
85% of retail investor accounts lose money when trading CFDs with this provider.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.