If you were to purchase some bitcoin from a cryptocurrency exchange, you would need a virtual wallet or secure drive to store your cryptocurrency. Storing bitcoin online is not necessarily safe, as users of Mt. Gox found to their cost.
In 2014, Mt. Gox filed for bankruptcy with $64 million in liabilities, after a hacker stole all of the bitcoins stored in the site’s vaults. Thousands of customers lost their money. Four years later, the debacle is still ongoing, and many people are still waiting for their claims to be settled.
In February of this year, it was reported that hackers had stolen more than $50 million in cryptocurrency from one of the most popular digital currency wallets. Thieves used poisoned Google ads to direct users to websites masquerading as legitimate blockchain.info domains. Once users typed in their credentials to access their wallets, hackers were able to steal their bitcoin.
Trading bitcoin CFDs is far less risky.
What are CFDs?
In the world of forex trading, a CFD or Contract for Difference is a contract between a trader and a broker. The contract stipulates that the broker will pay the trader the difference in price between the asset now and on a future date, as per the contract.
Forex traders use CFDs to speculate on the future prices of currencies. Because cryptocurrencies such as bitcoin are exceptionally volatile, and prices move up and down very quickly, investing in CFDs is safer – and easier – than purchasing physical bitcoin.
Instead of buying bitcoin via an exchange, you speculate on the price by investing in a bitcoin CFD. Trading bitcoin CFDs has a lot of advantages. For starters, you can use leverage to maximize your profits on a trade. This means you can open a trading position with a relatively small amount of capital and trade with up to five times the amount. You don’t have to use leverage, but most reputable forex brokers do offer leverage as an option.
Opening a Trading Account
Trading CFDs via a reputable broker is as safe as it can be. There are a number of trading tools at your disposal. You can make good use of take profit and stop loss tools to minimize your exposure to losses. If you decide to make the most of the leverage to boost your profits, it is wise to use these tools. Set them at an appropriate level, taking into account the fact that the price of bitcoin can fluctuate wildly in a matter of days. A take profit tool lets you lock in a profit before the asset falls in value, so this too is a useful tool.
If you are new to trading bitcoin CFDs, have a go with a demo account. This gives you an opportunity to practice using the tools and get used to how a trading account works. Most bitcoin CFD traders are day traders. They can open and close a position within a short time, without incurring overnight broker fees.
Review the options before you start trading in bitcoin. Lastly, always assess your appetite for risk, and if you are more interested in a long-term investment strategy, consider buying bitcoin and storing them on a physical hard-drive.
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Founder Dinis Guarda
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