Article sponsored by Alvexo
The rise of cryptocurrencies is attracting growing interest among individuals who wish to diversify their investment strategies. In recent years, cryptocurrencies such as bitcoin or ether have indeed stood out for their strong increases in value, despite the variations. As a reminder, these currencies are called “decentralized”, insofar as they are issued by players who do not go through central banks. On the transaction side, these new assets are exchanged and stored in a secure database, because it is encrypted, called the blockchain.
Volatility, a source of potential opportunities?
Because the course of these currencies is very volatile, it is necessary to launch with redoubled caution. The environment can be buoyant but it is risky.
It is at this stage that one can consider varying and diversifying their trading strategies. Do you feel uncomfortable with the risk of buying a cryptocurrency which, perhaps, has no future and could disappear one day? No problem, many traders then resort to the following solution: trading called “CFD”, which consists of investing, not on the asset itself, but on the price movement of this asset, which is not never bought.
How cryptocurrency CFD trading works
Two scenarios then exist. If you correctly anticipated a rise, or fall, of one or more cryptocurrencies, and the course prices followed your prediction, you will be winners. Conversely, and symmetrically, you will lose if you anticipate a rise (or fall) in prices, but they do not follow your expectation.
The limited risk account: also applicable to cryptocurrency trading
For the sake of strict alignment with the regulations, the broker Alvexo provides the “limited risk account”, which bears this name because it is non-leveraged and because it includes a guaranteed “Stop Loss” to block potential losses automatically, if prices go in an unfavorable direction for the trader. A tool appreciated by many investors, which therefore also applies to cryptocurrencies.
Contracts For Differences (CFDs) are complex financial instruments and carry a high risk of losing money rapidly due to leverage and may not be suitable for all investors.
76.57% of retail investor accounts lose money when trading CFDs with this provider. You have to ask yourself if you understand how CFDs work and if you can afford to risk losing your money.