Hello everyone and welcome to my homework post for week 2 of Season 2. I am really thankful to Professor @kouba01 for explaining the CFD in such an easy and excellent way. This is how I am learning many new things in this Crypto Acadamey. Here is my assignment which i have completed by reading Professor @kouba01 's lecture and doing some research by my own.

What is a cryptocurrency CFD?

CFD is abbreviation used for Contract for Difference. A CFD is a kind of trading where you don't need to have the cryptocurrency in your wallet. The trader doesn't own the crypto asset and instead trades on the price of the crypto asset. It's a financial futures exchange agreement in which the difference in compensation between the open and closed exchange rates is paid in cash. CFDs do not require the distribution of physical products or share.

It allows people to profit from the shares and indexes that are used. It is a great risk to invest in CFDs ; If you can make a lot of money, you can also lose a lot of money.

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You are purchasing the actual estate, which is the underlying asset, as you purchase the underlying asset and wait in long-term stocks. As a result, it will not be a CFD transaction.

CFDs is a sophisticated trading technique used by traders who are experienced and it's not permitted in the United States.

Key Points
1- CFDs are common in FX and commodities products because they enable investors to trade the course of securities in the very short term.

2- CFDs are cash-settled, so they normally make for a lot of margin lending, because buyers just have to offer up a limited portion of the contract's notional payout.

3- CFD is a type of financial contract which covers the contrast between the open and closed exchange settlement prices.

Prons and Cons of CFD

Prons	Cons
As Contract For Difference uses leverage so it allow s the buyer to deposit the substantial portion of trade volume with a broker.	Since its business is unregulated and illegal in US , so investors depend on the broker's integrity and legitimacy.
It make it easy for traders to take a shorter or longer stake as well as a sell or buy position.	If an investor is in losing position their broker will issue a margin call requiring the deposit of extra fund.
The traders can exchange the price change of commodities such as stock indexes and ETFs.	With CFD, leverage can amplify benefit but there is also chance of lose
It offer holders all of disadvantages and disadvantages of buying a safety and security without having to really buy it	Broad gap in between broker's bid and ask price may result from extreme market uncertainty.

How do I know if cryptocurrency CFDs are suitable for my trading strategy?

You can do some study and investigation before beginning to trade Cryptocurrency CFDs. Consider the following factors to determine if cryptocurrency CFDs are appropriate for your trading approach;

1- Trading with regulated brokers in a secure atmosphere.

2- It beneficial to conduct preliminary research into the terms and conditions that regulate CFD trading.

3- If an investor has a small amount of money and needs to use leveraged investing, Cryptocurrencies are very costly, and not everyone can afford them. As a result, CFD trading allows users to deal for relatively little money.

4- You will need money to start CFD trading, and it's always a smart idea to buy or trade with spare cash, but you will have to figure out how you will deal with the possibility of losing money that comes with trading.

5- Such investing necessitates a thorough understanding of margin and leveraged trading.

6- Only put money into investments that you can afford to lose. Cryptocurrency is a highly risky market in which an investor may lose all of his money.

7- You should obtain expert training through online course videos or through reading articles about CFDs trading before investing.

8- Trading cryptocurrencies is very dangerous, and it can only be done with risk money.

9- Short-term trade is ideal for CFD trading.

Are CFDs risky financial products?

Yes, CFDs are high-risk financial instruments. As we all know, cryptocurrency is very unpredictable, as it can go in either direction, short or long, rather quickly. As a result, if the market moves in the opposite direction of the trader's price projection, the trader can suffer a significant loss. CFDs are very dangerous, and the crypto industry is rife with volatility, making trading very unpredictable.

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Margin and leverage are part of CFD trading, which increases the risk of this type of trading. Complete guideline of such trading is critical; otherwise, it can be very dangerous, and a investor may lose all of his money. As a consequence, on the home page of every broker's website, there is a disclaimer stating that trading is extremely dangerous. It will not be sufficient for all.

As a consequence, cryptocurrency CFD trading is extremely risky and can only be undertaken with high-risk capital.

Do all brokers offer cryptocurrency CFDs?

No, Not all the broker offer CFD. There are only few broker who offer the CFD s cryptocurrencies. Below is a list of the top rated brokers who are offering the CFDs crypto currency.

BitMEX: Its a bitcoin exchange as well as a forum for trading derivatives.

XBTFX: It's a relatively latest Crypto Contract For Differences broker that provides investing on a variety of commodities and has seen significant growth since its inception. On the MT5 trading site, they sell leverage of up to 500x. They've been steadily widening their asset coverage to encompass almost all of the big asset group.

TIOmarkets: It's an FCA and FSA-licensed Forex/CFD broker based in the UK.

eToro: It is a financial and copy trading social exchange and multi-asset brokerage company based in Israel.

PrimeXBT: It allows users to trade cryptocurrencies and CFDs on its site.

Explain how you can trade with cryptocurrency CFDs on one of the brokers (Using a demo account).

eToro is not available in Pakistan. As a result, I opened my a PrimeXBT account.

Then i opened a Demo account after checking my account. Then i make my first BTC/USD transaction. A few screenshots are shown below.

I began a deal by pressing up.

I've begun a buy position.

When you confirm, a trade is started.

A exchange is free as can be seen in the image below. I selected Open Positions and was presented with a list of trades I had made.

Conclusion

To sum up, traders with a limited amount of capital will exchange Cryptocurrency CFDs through a controlled broker. Since such trading entails a high level of risk, risk capital must be allocated so that a trader can comfortably manage to lose that capital.

@kouba01

Thanks in anticipation.

Regards,
@sadiaanyat