This is the question that most people who are just starting out with crypto investing have in their minds. And it is a very pertinent question to ask.
Cryptos are volatile assets, and as much as they can make quick gains, they can roast your rooster to charcoal as fast if your finger is not on the proper dial. This is more so if you have a little cash to start off.
So is it possible to watch your dimes grow from almost zero? Let us try and find three ways of doing exactly that.
Investing in CFD Trading
Welcome to the world of Contracts for Difference (CFDs) and the way they are used for leveraging stocks of underlying assets. Let us explore a few things to get you started;
What is CFD trading?
In Contracts for Difference trading (CFD’s), you are allowed to speculate on the rise or fall of an asset’s value without really buying the asset.
Let me explain; You sell if you predict a fall in the value of the underlying asset, and you buy if you predict a rise.
By using the leverage provided by the exchange, you could be speculating on an asset ten times larger than your investment for an equivalent gain to someone who owns the asset. For example, if you have 100 dollars, you could bet on Bitcoin and gain as much money, with good prediction, as someone who holds $1000 worth of Bitcoin if your leverage is 10%!
But note. You could lose by the same margin if your predictions are wrong! CFD trading is a zero-sum game, and so if the price goes down, the buyer has to pay the seller the difference. It’s prudent to also keep an eye on broker spreads. The larger the spreads, the riskier the CFD if you are good at predicting a particular effort. A spread is simply a price allowance
the broker puts in the rise or fall of an asset price before they can apportion gains or collect losses from traded positions.
How to start trading Cryptocurrencies?
When you decide to try out CFD but do not have a huge budget, you will need a broker to help you out. A reliable broker that provides CFD trading is crucial because they lend you the money to leverage.
From you, a broker will require a margin which is a sort of deposit to protect himself from losses.
Protecting yourself from losses
CFD trading allows you to leverage your position on asset price increase or decrease. The underlying assets (cryptocurrencies) fluctuate a lot. Your goal is to predict the right kind of movement.
To avoid massive losses, you should avoid overextending yourself financially. Hence, You should never take a position that is worth more than what you hold in your CFD account. For instance, if you have $1,000, do not take a position that is worth $1,500 as this will wipe you out if there is a massive drawdown.
In the same breath, do not take credit from your broker that is more than your portfolio. Your broker should only lend you 5% to 10% of your portfolio amount. Lastly, do not invest in CFDs with credit money. There is money to be made, but you can also make losses.
A good piece of advice with CFDs is to make good use of the stop-loss and profit target functions to manage the movement of your portfolio as you speculate. Some brokerage platforms allow you to shadow successful traders, and most have practice accounts.
Trading on Admiral Markets
Admiral Markets UK Ltd is a European based online brokerage firm. They have been in the business for a while and have earned themselves a reputation for being efficient.
In the business of money, reputation is critical. This is why Admiral markets is a known name in the CFD circles. They opened their platform to CFD trading in 2013. Their website and trading platform are user-friendly, and it allows you to keep an eye on your investments 24 hours a day.
Trading in CFDs does not have to be a million-dollar affair. In fact, starting small is most recommended. However, you should take caution to avoid suffering losses and developing cold feet from the get-go.
If you have ever wanted to trade cryptocurrencies but are risk-shy, this is a great way to warm up.
The crypto universe has seen a proliferation of many different tokens. There is a massive opportunity to buy cheap tokens and get good returns within a short time as a token starts getting enough interest.
You can make handsome returns with some good research about many tokens that are not yet mainstream. Obviously, you have to be familiar with the crypto world, the impact of fundamental news on some cryptos and, as it recently becomes the main catalyst for cryptocurrencies volatility, the effect of regulation over cryptos’ prices.
If you decide to dig into cryptocurrencies trading, read as much as you can, follow some cryptocurrencies’ investors and analysts on social media, connect to Reddit and find a broker that provides you with the best terms. From that point, your profit depends on your discipline and trading skills.
Early Bird Crypto Looting
Token sales are a great way of making early investments in ICOs that you think will generate a lot of public interest. An ICO is a tokenized business which seeks to fund its future operations using crowdfunding.
When you learn about a blockchain company and its investment idea, the first thing you do is read about how the business will unfold.
What are the problems it seeks to address? Are there better alternatives? Who is developing the idea?
Once you are confident that the idea you are funding will generate interest, you now can invest in the token either for long-term holding or until you can reap a targeted return.
How to prevent losing your portfolio with ICOs
As much as you can make money with ICOs, the risks are high with many of them. Many tokens crash soon before issue, or you could have difficulties liquidating some of them if they are not being bought at the exchanges.
There are several things you can do to manage the risks;
Read the white paper – The whitepaper is the blueprint of any ICO. It spells out what the ICO intends to bring to the market. However, most importantly, it states the amount it needs to raise and how it plans to do that.
You should invest only in tokens that convert at the ICO, that way, even if the price decline sharply, the program will not be derailed.
Look for that needle in the haystack kind of token – Most tokens nowadays are doing the same thing. They mostly just want to add themselves to the decentralized system bandwagon. When investing always go for that coin or token that goes an extra mile.
For instance, most coins that are as a result of a hard fork such as Bitcoin cash or Litecoin cash will be worth your money if their improvement is revolutionary and in demand. Endeavor to also have in your portfolio those tokens that have been well marketed as they tend to have a lot of initial gains in the market.
While having a good capital base when investing in cryptos can be a good thing, it is possible to start small, learn, and grow your portfolio with time. Whatever you do, be it CFD trading via brokers such as Admiral Markets, Early Bird ICO investment or simple token purchases, use most of your time to research and get facts.
CFD trading can allow you to get leveraged earnings without buying the crypto you are speculating about. When you start with little money, you can learn early through less costly mistakes.
Learn and learn well. No one will give you foolproof advice on investing in cryptos. They are volatile assets, and this means that they make massive profits and return huge losses to different people, in different measure.
Risk disclosure: Forex and CFD trading carries a high level of risk that is not suitable for all investors. Presented information is not an offer, recommendation or solicitation to buy or sell. Before making any investment decisions, you should seek advice from an independent financial advisor to ensure you understand the risks involved. Read more at admiralmarkets.com.
This article was originally posted on FX Empire.