There is a difference between buying and selling cryptocurrencies on an exchange and trading them on a CFD platform. Both activities are carried out with the intention of making a profit by trading in the cryptocurrency market, but the processes involved are very different. This article describes how to buy and sell crypto, and how to trade cryptocurrency CFDs.
Buy and Sell Cryptocurrencies
The buying and selling of digital cryptocurrencies is basically about using a cryptocurrency, such as Bitcoin, to exchange it for another cryptocurrency, such as Ethereum, in a purchase or sale agreement within a cryptocurrency exchange market. The process involves searching for a cryptocurrency pair to perform a crypto-to-crypto trade, or exchanging crypto for fiat currency or fiat currency for crypto. The transaction is executed twice and in opposite directions to complete one exchange cycle in order to profit from it.
Trading Place
The buying and selling of cryptocurrencies is done on cryptocurrency exchange markets. The trader needs to open an account on the platform so he fills out an online form. Most markets have an order book that will show what users are buying and selling and where.
Deposits and Withdrawals when Trading Cryptocurrencies
Cryptocurrency exchange markets generally accept deposits and withdrawals in two ways. A small number of exchanges (mainly located in the US and UK) accept deposits in fiat currency or a mix of fiat and cryptocurrencies. However, most of the exchanges around the world accept crypto-based transaction methods, due to the restrictions imposed by banks on such exchanges to handle bank accounts. If the exchange only accepts cryptocurrency deposits and withdrawals, the trader must create a separate wallet that bridges the two organizations and allows the cryptocurrency to be used for deposits. The most common cryptocurrencies used for deposits are Bitcoin ,Ethereum y Litecoin.
To deposit funds, you would need to purchase BTC, ETH or any other deposit cryptocurrency independently and transfer it to your wallet. The funds are then transferred from this wallet to the wallet provided by the cryptocurrency exchange. If you choose to use this method, you must ensure that you enter the wallet addresses correctly when making transactions, as any crypto transferred to an incorrect address cannot be recovered.
Cryptocurrency Trading Process
Once the money has reached your wallet on the exchange, you will be able to buy and sell crypto by trading pairs containing your chosen deposit currency. Generally, BTC and ETH have the highest number of pairings on any platform, so you will not be short of trading when exchanging them. You will be able to use Stop Profit (“ Close at Profit “), Stop Loss Orders (“ Close at Loss “), or Future Orders to buy or sell your preferred Digital Cryptos.
Litecoin WebTrader screen and 3 cryptocurrencies seen from the front: Bitcoin, Litecoin and Ethereum
Illustrative prices.
Trade Cryptocurrency CFDs
Cryptocurrency trading can be done speculatively, usually by trading cryptocurrency prices through contracts for difference (CFDs). Here, the cryptocurrencies are not actually owned by the trader nor can he trade them. The process involves buying or selling contracts based on the price movements of the cryptocurrency in question.
Where Can I Trade Cryptocurrency CFDs?
Cryptocurrency CFD trading is done through online CFD platforms like Plus500. The trader must open an account by completing an online form. Verification of identity and residence address are mandatory requirements. Funds can only be deposited into the CFD account using fiat currency through various payment methods.
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How are Deposits and Withdrawals Made When Trading Cryptocurrency CFDs?
Brokers that offer cryptocurrency CFDs can only accept processes with fiat currency for deposits and withdrawals. Therefore, it will be common to see bank transfers, credit and debit cards, and/or e-wallets, such as PayPal, Skrill, and Neteller, as options used for transactions on these platforms. Funds must be transferred from sources bearing the name of the account holder, as anonymous funds are not permitted. Each deposit channel has its transaction limits. Bank transfers generally have unlimited capacity for deposits and withdrawals, but bank cards and e-wallets may have limits set by the CFD provider.
Cryptocurrency CFD Trading Process
After you have funded your CFD trading account using one of the deposit options found on the provider’s website or platform, you will be able to trade cryptocurrency CFDs two-way. In other words, you can profit from rising prices by buying low and selling high, or you can profit from falling prices by selling high and closing the position low. That is, positions would be closed at a loss if market prices move against you. You can trade at current prices, or you can use market orders that are triggered when the instrument reaches a specific price.
conclusion
You can interact in the cryptocurrency market in two ways: by buying or selling on a cryptocurrency exchange or by trading cryptocurrency contracts on an online CFD platform. If you are interested in exploring the latter option, it only takes a few minutes to open a CFD Demo account with Plus500 , where you can select your preferred cryptocurrencies from the wide range of available instruments.
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