- Contract for Differences (CFD’s)
- Advantages to trading Ethereum through CFDs include
- How to Buy Ethereum CFD’s
- Ethereum vs Ethereum CFD’s
Contract for Differences (CFD’s)
A CFD is a futures contract agreement, where the settlement of the difference in the value of the investment is made upon sale of the contract that does not involve the delivery of physical goods or securities. Meaning, you can trade price fluctuation without owning the tradable instrument.
In the case of Ethereum, while there is no actual ownership, an Ethereum CFD gives investors exposure to the risk and rewards associated with owning Ethereum.
CFDs have been a popular alternative option for investors to gain exposure across the various asset classes for many years, with the CFD market for cryptocurrencies expanding at a rapid pace.
Advantages to trading Ethereum through CFDs include
- Investors are able to go either long or short, giving investors the opportunity to earn from Ethereum’s upward and downward moves, by entering sell orders to go short or buy orders to go long on Ethereum.
- Instant trading, with an instantaneous execution of orders ensuring that investors obtain the desired purchase price, which is particularly important in the cryptomarket that has significantly larger prices swings than more traditional asset classes.
- Trading Ethereum CFDs also enables investors to enhance earnings with the use of leverage.
- When purchasing Ethereum, many exchanges require investors to buy Bitcoin to then acquire Ethereum. In contrast, investors are able to purchase Ethereum CFDs with fiat money, which is a far simpler process.
- Ethereum CFD investors don’t have to download wallets to store Ethereum coins or risk loss of investment through loss of passwords, keywords or from theft by hackers.
How to Buy Ethereum CFD’s
Once you have decided to take the exposure to Ethereum, without actually wanting to hold Ethereum in an Ethereum compatible wallet, the first step would be to identify a broker that meets your requirements as an investor.
HQBroker provides investors with various platforms to trade or invest into Ethereum CFDs, including platforms for Android phones, iPhones, tablets or web, with a Metatrader platform also available for desktop users.
The first step will be to open a trading account with HQBroker by selecting the ‘Open A Live Account’ link at the top right-hand side of the HQBroker home page.
Enter all of the personal information required and click “Register”.
Once registered, you will be taken through to the page to fund your newly opened trading account.
HQBroker offers a number of funding methods, from wire and PayPal transfers to depositing with credit and debit cards for instant funding to funding the account with Bitcoin or Ethereum amongst others. The minimum deposit is $250 for a standard starter account, which provides the ability to trade, but does not give you access to daily analysis or 24-hour support, with spreads floating rather than fixed.
Do note that, while you are able to proceed and fund the account, there is a verification process that needs to be completed. Upon registering, you will receive an email that not only provides you with your log in details, but also makes a request for necessary documentation for verification, which includes Proof of Identity and Proof of Residence that would need to be a utility bill or bank statement, dated within 6 months that shows name and address.
Those looking for the full suite of services would need to deposit $100,000 to qualify for an ‘Investor’ account that provides fixed spreads, daily analysis, 24-hour customer support, and free bank wires.
Once you’ve funded your account, there is a verification process to go through, where you are asked to select document type and upload, document types including proof of ID, proof of residence, a copy of credit card in the case of using credit cards to fund the account amongst others. Initial documents for uploaded will be those that were requested in your registration acknowledgment email.
While the verification process is underway, once you have uploaded your proof of ID, you will need to download the preferred trading platform. We have opted to download the desktop MT4 trading platform, which can be downloaded by clicking the Download MT4 at the bottom of the client area page.
An executable will be downloaded that you will then need to run, agreeing to the terms and conditions by clicking ‘Next.’
Once the executable has finished running, you will need to click ‘Next’ as prompted and shown below.
Select ‘Existing Trading Account’ and enter the login and password details that were sent to you by email once your account had been funded. Do note that the login details are different to the login details sent upon registration that is for your HQBroker account.
For demonstrative purposes, we will proceed by selecting ‘New demo account.’ Once selected, you will be prompted to enter various details as shown below. Complete the necessary sections and click ‘next’. It will take a few minutes before your account is created.
Once you have completed the required sections and clicked ‘next’, you will be prompted to enter your login and password details. Enter the information and click ‘finish’ and your good to go.
Ethereum vs Ethereum CFD’s
As mentioned earlier, there are a number of advantages to trading Ethereum CFDs over buying and selling the actual coin and, while holding Ethereum gives you the true ownership of the cryptocurrency, for those looking to simply have the exposure to the intraday volatility and longer-term direction, CFD trading is certainly the more efficient product to trade.
When considering the fact that Ethereum has been known to slide by more than $100 in a matter of minutes, instantaneous trade execution is particularly relevant to those looking to trade on a higher frequency basis.
In addition, Ethereum CFD traders are not concerned with having to deposit and withdraw cryptocurrencies from their chosen trading account into an Ethereum wallet to avoid being hacked. The ability to trade both long and short, with the availability of leverage, can also be particularly appealing compared to buying Ethereum via exchanges.
While the cryptomarket bulls have been optimistic over the longer-term price outlook for Ethereum, in the near-term there’s plenty of volatility that has stemmed from uncertainty over how governments and regulators will regulate and oversee exchanges that cater for cryptocurrency trading and actual investors.
Through much of this year, the markets and investors have responded negatively to regulatory news, which has left many Ethereum coin holders with heavy losses, whilst investors trading Ethereum CFDs will have had the opportunity to benefit from the declines seen through this year through short selling, Ethereum having slumped from an all-time high $1,419.96 in January to $360 in April before finding support.
While trading Ethereum is more of a single trading strategy, where you are looking to gain from upward moves, the fact that Ethereum CFD trading gives you the option to go both long and short, with leverage, means that you will not only need to pay particular attention to the news wires, for both positive and negative news but also consider technical analysis in trading.
For those looking to enter the crypto market via CFD’s, HQBroker is one of the most reliable brokers to provide cryptocurrencies contract for differences.