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Trading without owning the underlying Cryptocurrency

If you are interested in trading cryptocurrency with a sole focus on trading, without owning the cryptocurrency, Crypto Derivatives offer a variety of interesting possibilities. With Crypto Derivatives is it possible to speculate, in a variety of ways, on price changes of the underlying cryptocurrency. The variety of ways under the umbrella of Crypto Derivatives are CFDs, Futures, Options, Bonds, ETFs and ETNs. Crypto Derivatives and CFDs are traded through brokers. Risk Warning: Trading Crypto Derivatives, and CFDs, involve significant risks and losses can exceed your investment. Your capital may be at risk.

Margin Trading – Crypto Trading with leverage

Margin Trading is an additional feature offered by Crypto Derivatives. Margin Trading makes it possible to open positions with leverage. Opening possibilities with leverage allow to invest more money than normally would be possible. For example a cryptocurrency that increased in value 10% would have yielded an increase of 20% in the position after opening the position with 2X leverage. Leverage trading is possible up to 1:100 meaning trading with 100X leverage. Margin trading is possible due to the existence of the lending market where lenders provide loans so the trader can invest in larger amounts of money. Subsequently lenders benefit from interest on the loans. It is very important to mention that margin trading is only recommended for highly experienced traders. Margin trading comes with a very high risk.

 

CryptoDerivativeTrading.com

Founded in 2018. The purpose of CryptoDerivativeTrading.com is to inform the community about news in the market and all developments related to Crypto Derivatives. Besides we aim to support and inform traders in their choice for a broker to trade Crypto Derivatives and CFDs. The trader can find a comparison of different Crypto Derivative and CFD brokers in the Cryptocurrency Brokers section of CryptoDerivativeTrading.com. Risk warning: The financial products as discussed on CryptoDerivativeTrading.com and the financial products offered by the companies listed on this website carry a high level of risk and can result in the loss of all your funds.

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Crypto Derivatives are financial instruments that are dependent upon, or derived from the price of underlying cryptocurrency. Crypto Derivatives are contracts between two or more parties and based upon the value of cryptocurrency. The value of the contract is determined by fluctuations in the value of the underlying cryptocurrency. Under the umbrella of Crypto Derivatives are CFDs, Futures, Options, ETFs and ETNs.

Contract for Differences (CFDs) are one of the possibilities to trade cryptocurrency without owning the cryptocurrency itself. When trading CFDs, the trader is able to enter a contract at certain price. After leaving the contract, the traders receives or pays the difference between the value of the current contracts and the value of the entered contracts. The usual way to profit is to enter a contract at a lower price and sell the contract at a higher price. Alternatively, the trader has also possibilities to short, that is, to sell the contract first and enter the contract later. In the financial markets CFDs have become highly popular financial instruments due to the availabilities of possibilities to trade with leverage. CFDs are leveraged investments meaning that the trader does not commits all his available money to a single trade. Leverage trading, also known as trading on margin, a trader only needs to put down a percentage of the trade to open a position.

The risks in CFD trading require more attention than traditional investment management. CFD trading carries a high level of risk. Please be advised that trading with leverage has an increased level of risk and may result in losing all your capital.

Futures are another possibility to trade cryptocurrency without owning the actual cryptocurrency itself. Futures are therefore another form of Crypto Derivatives. Future contracts for cryptocurrency allow to make trades for the price of value for the underlying cryptocurrency for some time in the future. A futures contract, is an agreement between two parties for the sale of a cryptocurency at a before agreed upon price. Futures are regularly used to hedge against risk for a specific period of time and can be traded with leverage.

Options are another form of Crypto Derivatives that offer possibilities to trade on the rise or value of the underlying cryptocurrency. An option is agreement between two parties, granting one of the parties the opportunity to buy or sell the cryptocurrency from the other party at a predetermined future date. One of the differences with futures is that it is impossible to settle the position at any time, the trader either wins or loses the maximum after reaching the expiry time.

Exchange-Traded Notes (ETNs) are Crypto Derivatives that are based on the performance of a market index. The goal of ETNs is to replicate the rendement of (a certain segment) in the cryptocurrency market or a basket of different cryptocurrency. The ETN is a tracker of a market index that replicates the results of (a certain segment) in the cryptocurrencty market or a basket of different cryptocurrency. ETNs are passive financial instruments and the speculant does not buy or sells the actual cryptocurrency.

An Exchange-Traded Fund (ETF) is very similar to an ETN. The difference between ETFs and ETNs is that the ETF is a type of fund that owns the actual underlying asset. ETFs in the cryptocurrency market are funds that own the underlying cryptocurrency. Important to note is that the shareholder of the ETF does not directly own the underlying cryptocurrency.

In trading Crypto Derivatives margin trading is common practice. Margin Trading makes it possible to open positions with leverage. Opening possibilities with leverage allow to invest more money than normally would be possible. For example a cryptocurrency that increased in value 10% would have yielded an increase of 20% in the position after opening the position with 2X leverage. Leverage trading is possible up to 1:100 meaning trading with 100X leverage. Margin trading is possible due to the existence of the lending market where lenders provide loans so the trader can invest in larger amounts of money. Subsequently lenders benefit from interest on the loans. The use of financial leverage can potentially magnify gains but also leave the trader with devastating losses. Leverage therefore has the deserved reputation of being a double-edge sword. Since the cryptocurrency market is considered highly volatile the risks of margin trading in the cryptocurrency market are higher than in the regular financial markets. Because of the heightened risks, margin trading can only be conducted in a type of account known as a margin account. Margin trading is best left to experienced and skilled traders who are known and understand its risks. For those interested in margin trading, please educate yourself deeply and thoroughly.

Crypto Derivatives are sometimes used for hedging, or insuring risk. Hedging is investing in securities, assets or derivatives that are negatively correlated. Hedging is a valid strategy in an attempt to protect a portfolio from uncertainty.

Risk Warning: The financial products as explained on this website and the financial products offered by the companies listed on this website carry a high level of risk and can result in the loss of all your funds. You should never invest money that you cannot afford to lose. Crypto Derivative and CFD trading involve significant risks and losses can exceed your investment.

An initial coin offering (ICO) is an unregulated means of crowdfunding for new cryptocurrency venture. When a cryptocurrency startup is looking to raise money for its venture it usually tries this through an ICO. In spite there has been successful ICO transactions investors are cautioned to be wary for fraudulent ICO campaigns.  In an ICO a certain quantity of the crowdfunded cryptocurrency is pre-allocated in the form of tokens. Tokens become (functional) units of currency if and when the ICO’s funding goal is met and the project launches. The US Securities and Exchange Commission (SEC) has warned investors to beware of scammers using ICOs to execute “pump and dump” schemes. The developers themselves can be guilty of such tactics. However, the SEC has also acknowledged that ICOs “may provide fair and lawful investment opportunities.

The purpose of CryptoDerivativeTrading.com is to inform the community about news in the market and all developments related to Crypto Derivatives. Besides we aim to support and inform traders in their choice for a broker to trade Crypto Derivatives and CFDs. CryptoDerivativeTrading.com does not provide any form of investment, financial or legal advice. The content posted and linked on this website is for information purposes only.

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