DeutschThose who opt for this approach can usually gain experience with a comparatively small budget and achieve impressively high returns that can certainly compete with crypto profits from peak phases of the market. And often in the short or medium term.
Trading with Derivatives: the Path to Quick Profits in any Situation?
As far as the available capital is concerned, many CFD brokers (as well as providers of trading in binary options and other derivatives) offer the possibility of trading with leverage – here experts also speak of the leverage effect. With such a trading model, traders could invest many times their equity in positions with one euro of equity. It is important to know that the use of leverage involves considerable risks. Another key term here is the margin call. If such leveraged positions threaten to end up out of the money, i.e. with a loss, trading providers can demand that their customers deposit additional money.
On the other hand, orders (positions) can be closed by the broker before the originally planned expiry date if the account is not covered. In this case, traders would miss out on the hoped-for profit, while fees may be charged and costs incurred.
Short and Long Positions in Crypto Trading
Anyone who is active in the field of CFD trading can choose between “bets” on rising and falling prices. This is precisely the big difference to buying cryptocurrencies. When buying coins and tokens, profits are only achieved when prices rise. In some cases, it can take a long time before digital currencies literally generate a return. CFD trading, on the other hand, can also bring profits in the short term – even if prices are currently falling.
Long Positions – Speculating on Rising Prices
Traders who open long positions expect the price of a cryptocurrency to rise. In short: Positions are bought with a view to the current market price of a currency in anticipation of a price increase. If the hoped-for scenario occurs, the trader books a profit on the later sale. The profit in question results from the difference between the closing price and the opening price. Due to the leverage effect mentioned, the profit can be correspondingly high. In technical jargon, these transactions are referred to as “going long”.
Short Positions – Traders Expect a Price Decline
Short positions are the counterpart to long positions in CFD trading. Experts also use the term “going short” here. Traders who short buy an asset and expect the current market price to fall. Here, the profit is calculated vice versa by subtracting the closing price from the opening price.
Options for Individual Optimization of Positions
In addition to leverage, the “margin” also plays a role as collateral in relation to the trading volume of a position. In the context of personal risk management, traders can set up “buy or sell stops” with brokers and use various other instruments – also known as order additions. Which order extras are available varies from provider to provider. Some extras are free, while brokers sometimes charge fees for special extras.
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