What is Ethereum Classic (ETC)?

Beginner's Guide

Ethereum is a platform powered by blockchain technology that is best known for its native cryptocurrency, called ether, or ETH. Smart contracts, which originated on the Ethereum platform, are a central component of how the platform operates. A smart contract is a self-executing contract with the terms of the agreement between buyer and seller being directly written into lines of code. The code and the agreements contained therein exist across a distributed, decentralized blockchain network. The code controls the execution, and transactions are trackable and irreversible.

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Monday, August 21, 2023 Veronica Imasheva Education No comments

How Does Cerus Markets Help Traders Succeed?

You have heard all about different cryptos, how to trade different pairs, trading indices versus stocks or cryptos versus stocks, and a range of trading concepts. We have also talked about various technical indicators and how they help you trade. What we haven’t talked about is how we can help you succeed in your trading. After all, wouldn’t you want to be the trader that goes to the comedy club after a successful day at work? Just think about it, you would be laughing all your way to the bank! In this article, we will discuss how Cerus Markets can help traders succeed. We won’t make it boring by simply listing all our features and why they are great for a trader. Rather, we will talk more holistically about why some of Cerus Markets’ specific features make sense, who can benefit the most from Cerus Markets, and what opportunities you can harness with Cerus Markets. What To Look For In A Trading Platform There are plenty of platforms offering opportunities to trade a wide variety of assets including leveraged instruments like CFDs. It can get a bit overwhelming trying to figure out which one is the most appropriate. Regulation In order to gauge the quality and fit of a platform for a trader, it is important to first understand what to look for. We believe that one of the first things to inquire about is whether the platform is regulated. A fly-by-night operator can simply vanish with your capital if you aren’t careful. Cerus Markets is regulated by the Labuan Financial Services Authority in Malaysia under the Labuan Financial Services and Securities Act of 2010. Therefore, it has to follow responsible business practices and provide certain protective features to its customers (traders). Instruments Available To Trade The next thing is the variety of instruments available to trade. The more the instruments, the higher the number of opportunities to trade. Stocks, commodities, and crypto are almost standard for a lot of modern trading platforms. Derivatives like NDCs and CFDs not only offer leverage but also allow traders to make a bet on one asset versus another. A stock versus an index or one crypto versus another is possible with derivatives. Cerus Markets has over 500 instruments covering a wide variety of asset classes. Costs And Fees The costs are another important factor worth considering when comparing platforms. Brokerages and platforms earn their incomes through fees, commissions, and spreads that they charge on trades. Certain value-add services also offer extra income. Cerus Markets does not charge fees or commissions. There are no fees on deposits and withdrawals either. Cerus Markets earns through the spread (bid-ask difference) on every trade executed on its platform. Cerus Markets also offers new users a bonus deposit offer where it matches whatever the customer deposits up to a maximum amount of $5,000. The Platform Interface And Usability Having a platform that is convenient to use and easy to navigate is important. The platform should be available on the computer and mobile so that you can execute traders on the move. The platform should graphically be intuitive and offer all the tools and indicators in one place. It should also have news, educational content, and everything needed to be well-informed about the markets. Lastly, the platform should also be secure. Cerus Markets has a two-factor authentication setup, plenty of content free to read, a web and mobile version, a host of technical indicators, and clean charting graphics. Cerus Markets has an extensive news portal covering a variety of assets. An economic calendar allows traders to stay on top of all the important events that have the potential to move the markets. Overall Reputation Ultimately, the platform that you work with is like your partner. Important money-related decisions are executed by the platform. So, your partner has to be reliable and reputed. One way to check the reputation of a platform is through reviews. Cerus Markets is verified as a business on Trustpilot’s website. It also has a rating of 4.1 out of 5. The rating can be accessed at TrustPilot. Other Factors to Note Cerus Markets offers a relatively high leverage ratio of up to 400:1. For cryptocurrencies, the leverage ratio is 100:1. Higher leverage ratios may excite traders, but they can also be a double-edged sword if the trading does not include risk management. Users can choose to receive push notifications through its Stream service. The platform has an activity terminal where users can set up price alerts and get notified in case of abnormalities or significant price fluctuations. These features are different from a plain vanilla price alert. ZAOne unique thing about Cerus Markets is that it offers its own trading platform. So, if you are tired of using MetaTrader and want something different, then a proprietary trading platform could be an option to consider. Traders from 100+ countries can open accounts with Cerus Markets and trade on the global markets. So, traders have access to instruments and assets outside of their home countries. They can truly take advantage of trends and events happening globally. As a policy, Cerus Markets maintains a strict account separation between its own money and client funds. Therefore, at no point in time is client money used by Cerus Markets. It is important to check this feature among every broker that you research. Who Can Benefit From Cerus Markets? Cerus Markets offers a comprehensive trading solution to traders. Those who want to trade crypto CFDs, crypto pairs, and a variety of global assets will find Cerus Markets helpful. Those who are cost-conscious and dislike paying a variety of fees and commissions will find Cerus Markets’ pricing structure helpful. Traders who like getting news and updates will appreciate the depth and amount of news content that Cerus Markets generates regularly. If you are wondering whether Cerus Markets is more of a CFD platform where experienced traders who know how to handle leverage can benefit, then you are partly right and partly wrong. Even those who are very new to trading can find Cerus Markets useful because the platform offers traditional assets for trading as well. Traders who are motivated to self-learn through online resources and then put the learnings into practice will find Cerus Markets’ content and trading platform combo appealing. Final Words In this article, we have talked about the attributes of a good trading platform. We also discussed how specific features of Cerus Markets can make the platform a reliable partner in your trading journey. We touched upon the educational and content-related offerings of Cerus Markets and also discussed important security features that trading platforms should have. We hope that you are now better informed about picking the right trading platform.

Monday, August 21, 2023 Veronica Imasheva Education No comments

How to Trade USD/SGD

There are plenty of foreign currencies that a trader can choose to trade and hopefully make a profit. The US dollar, the pound, the yen, the Australian dollar, the Swiss franc, the Euro, and the New Zealand dollar are the popular currencies. Speaking of popularity, it’s generally the popular folks that get invited to parties. Think about high school and college, wasn’t that the case? What if foreign currencies decided to have an “exchange party”. You probably think we are crazy writing this sort of stuff but just hold on. What if the US dollar invites the Singapore dollar to that party? The SGD might be a “sing”-ificantly valuable addition to the energy. There is plenty to like about Singapore. Besides the incredible buildings like the Marina Bay Sands Hotel and the booming tourism, Singapore is an important economy in south-east Asia. It also serves as an important hub in the maritime shipping industry. A lot of expats and foreign workers also like living in Singapore and managing the Asian headquarters of multinational companies. Singapore also has no foreign debt and high government revenue. It is a stable economy. So, trading the Singapore dollar may not necessarily be such a bad idea after all. It may be ok to let the SGD join the currency party. Not many people would be trading the SGD and therefore there may be pricing anomalies to look for. In this article, we will take a closer look at some basics of forex trading. We will also discuss the US and Singapore economies briefly. Then, we will explore ways in which traders can conceptualize trading strategies. Sounds ok to you lah? Then let’s go! Currency Trading, Pips, and Understanding Ratios When you buy or sell a currency, you use another currency to execute the transaction. For example, if you want to buy the Singapore dollar, you may use the Japanese yen, the US dollar, or whatever currency you hold. So, trading one currency involves the use of another currency. It is why whenever the price of one currency is quoted, it is an exchange rate. To buy one pound, you may need 1.2 Euros. Forex traders often talk about price changes in terms of pips. One pip is 0.01% or 1/100th of a percent. So, for example, if the exchange rate of EUR/USD goes up from 1.2010 to 1.2011, then the exchange rate rises by 1 pip. If the exchange rate goes from 1.2010 to 1.2110, and if you were long EUR, then 100 pips are your gain. Going long or short a currency is like trading a ratio. As explained above, forex trading involves two currencies. You buy one by selling another. So, if you want to buy EUR, you might use your USD to buy. Therefore, you are hoping that the EUR strengthens versus the USD. This can happen if EUR goes up more than USD or if USD stays constant while the EUR rises or if the EUR stays stable while the USD devalues. Therefore, when trading foreign currency, it is important to understand how one currency is behaving with respect to the other. For USD/SGD trades, you will have to track all the developments in the US and Singapore and how USD will move relative to SGD. Economic Snapshot Of The American And Singaporean Economies While plenty of discussion revolved around how the fast increases in interest rates will lead the US to an inevitable recession, that still has not happened. The most talked about metric has been inflation and it has interestingly stabilized if not slowed down. Unemployment has been at relatively low levels of around 3.6% and payroll growth in June 2023 was 209,000 which was a relatively healthy number as compared to historical data. The US treasury 10Y yield was inching up above 4% while the dollar index looks like it would drop below 100. A falling dollar index is usually a positive sign for global equity markets. The US stock market has been in an uptrend in 2023. So, overall, there seem to be no recession prospects in the near term. Singapore, meanwhile, avoided a recession narrowly after its economy grew 0.7% in the second quarter of 2023. The first quarter witnessed a negative growth of 0.4%. Singapore’s central bank has warned of an uncertain future as far as the economy is concerned. The travel and tourism sector is an important one for Singapore. The sector has been on an uptrend globally and Singapore was no exception. The future prospects for travel and tourism continue to remain bright. Interest rates for Singapore’s 10Y government bond have risen from around 2.7% in April 2023 to over 3%. The general trend has been up since 2020. The Singapore dollar has strengthened versus the US dollar since peaking in October 2022. Thinking About USD/SGD Trades There are two main approaches to trading. One is a systematic style where rules are pre-defined. The other is more subjective and discretionary. It involves the trader making a judgment on whether to trade or not. The rules are loosely defined and they can be flexible in the second approach. No one approach is better than the other. It all depends on what works for a trader. Discretionary trades can involve technical and fundamental analysis or an event-based opportunity. Systematic trades are generally strategies that have been backtested and statistically analyzed. The rules of entry and exit are pre-determined. There is no hunch or gut feeling as a trader blindly follows the system. In the age of algo trading, the rules are fed to a computer and the machine automates the trading. Regardless of the approach used, the use of technical indicators can be one way of identifying trades. For example, support and resistance levels can be estimated using trend lines and Fibonacci retracement levels. Moving averages may also be used to find reversal points or generate entry/exit signals. Traders also tend to use Bollinger bands or oscillator indicators to identify trades. There is no dearth of indicators available to analyze the price action. Ultimately, instead of hunting for the perfect indicator combination, simply try to use what works for you. Even one indicator, if used effectively, can make you money. Final Words And Capital Preservation Trading is a business and profit is not a guarantee. Every trade has a risk-reward equation. In order to attempt to earn a profit, a trader has to risk losing some capital. If things go well, there are profits to be enjoyed. However, if things don’t go your way, a loss has to be booked. The key, therefore, is to ensure that when you win, you win big and when you lose, you lose small. Risk management is a must for trading currencies or any asset. In this article, we discussed the basics of forex, touched upon the current scenarios of the American and Singaporean economies, and looked at ways that traders conceptualize trades. If you are ready to trade USD/SGD, then open a new account with Cerus Markets. The ongoing 100% welcome bonus offer is a good way to begin trading.

Monday, August 21, 2023 Veronica Imasheva Education No comments

Understanding Bull and Bear Markets

Bulls vs Bears. This struggle between the two is something every stock market investor knows. If these stock market bulls and bears were to start their own band, then the bulls will be good at making bullish music that will ride the upbeat trends. The bears, meanwhile, will balance that out with bearish ballads that will soothe investors when the slow music slows things down. In case you are wondering whether you will actually see bulls raging on a run and bears attacking all over the place then fear not. There is no actual animal involved. Rather, the names “bull” and “bear” is a symbolic term to describe the way the stock market behaves in different phases. With so much interest in the stock market these days, there is no place for the bulls or the bears to hide (or to play hide and seek). No matter where they hide, the market will always find them. They cannot escape the investors’ watchful eyes! Through this article, we hope that you will understand bull and bear markets and be able to keep track of them with the same sort of watchful eyes that an experienced stock market participant has. First, let us understand where the name bull and bear really came from. Surely The Bears and Bulls Won’t Come Into My Office, Right? A bull attacks its opponent by using its horns and thrusting its victim in the air. In the same way, when the stock market is in a strong uptrend or a bull run, it will thrust a lot of the stock up as prices will keep on rising. When a bear attacks its opponent, it swipes down viciously on its victim. Back in the day, salesmen of bearskin anticipated a fall in the price of the bearskin and closed sale transactions at a specific price even before they had the bearskin inventory in possession. This is very similar to short-selling, one of the classic features of a bear market. So, when bears swipe down, the fall is swift and potentially steep. Thus, a downtrend was viewed as being attacked by a bear while an uptrend was viewed as being thrust up by a bull. That is how the terms bull market and bear market came into being. So, in case you were worried whether a bull or bear will barge through your door, then you can breathe easy. Just try not to get attacked by the price volatility in case you end up on the wrong side of the market trend. The Characteristics of a Bull Market In a bull market, prices rise. Usually, stocks of all companies (small, mid, and large-cap) tend to rise for the most part. Of course, there will be companies that won’t do well, but in general, the prices rise across market caps. There is also plenty of positive, feel-good sentiment among the market participants. The economy tends to do well during bull markets, there is capital expenditure happening, businesses grow, and the media reports positive things for the most part. The broad-based positivity and outperformance across sectors and market cap categories invite broad-based participation from investors. It is a sort of feedback loop where price rises invite more participation which leads to more price rises. In technical analysis terms, indices start making higher highs and higher lows. Some investors from specific markets have even conducted studies to show that even a randomly selected portfolio of stocks performs well during bull markets. While that may or may not be true for your specific geography or market, the point being made is that when the tide rises, all the boats in the water also rise. Valuations of stocks during a bull market also rise. The price-to-earnings ratios begin to head towards historical peak levels (sometimes even exceeding the previous peaks). Bull markets usually coincide with low-interest-rate regimes. The positivity turns into excitement and then into euphoria. Investors face FOMO or the fear of missing out on the next big wealth-creating stock. Gradually, the bubble bursts, and a bear market makes its way. The Characteristics of a Bear Market A bear market happens because prices fall and they continue to fall. Falling prices are not the only criteria of a bear market as a simple pullback during a bull run is also characterized by a slight fall in prices. However, if the price falls are greater than 20% and if there is a widespread belief that prices will continue to fall, then a bear market is well and truly underway. During a bear market, there is a sentiment of pessimism and fear. The emotion of fear leads to sharp falls in the prices of stocks and indices. With the falling prices, the sentiment turns negative. The media start reporting everything that is wrong with the economy and how gloomy things can get. While price-to-earnings ratios of cyclical and other sector stocks fall, defensive sectors tend to do well. Bonds and fixed income can also potentially see higher demand as investors seek refuge from underperforming equities. News of layoffs starts making its way into mainstream media. Central banks respond to fears of recessions and unemployment by updating their monetary policies. They lower interest rates from high levels in order to stimulate the economy. What Can Traders and Investors Do In Bull and Bear Markets? Traders and investors should first accept that bull and bear markets are natural parts of the economic cycle. The goal during a bull market should be to compound capital while the goal during a bear market should be to protect capital. Market participants should also accept that it is not possible to exactly exit the market at the top of the bull run and enter the market at exactly the bottom of the bear market. However, as long as you are vaguely right with your entries and exits, there are enough returns to be earned. The key is to recognize that a bull market has begun or that a bear market is in play. If not losing money means sitting out of the market completely, especially in a bear market, then there should be no hesitation in doing that as well. Sitting in cash is not necessarily a bad thing. Final Words In the above article, we explained what a bull and bear market is. We talked about how the names bull and bear came into being and how it is linked to the way the two animals tackle their opponents. We also listed out multiple characteristics that define bull and bear markets and finally touched upon what investors and traders can do during these two phases of the market cycle. If you are ready to test yourself in bull and bear market conditions, then opening a new account with Cerus Markets is something you may want to consider. Our 100% welcome bonus offer can make it a win-win deal for you.

Friday, August 18, 2023 Veronica Imasheva Education No comments

NFTs Explained

NFT was a buzzword in the cryptocurrency circles not so long ago. People often used to associate NFTs with instant wealth. People used to suspect that NFT creators and buyers would become wealthy quickly. Wonder why. Perhaps, because they knew how to “token” up the cash and “mint” their own success. The words token and minting are closely linked to NFTs. You will find out how they are related. After reading this article, you will also understand how NFTs work and how they are different from cryptocurrencies. We will also cover the benefits of NFTs and explain what non-fungible or the “NF” in NFT is. For all the popularity and buzz around NFTs, the concept remains a mystery to many. We hope to demystify NFTs and help you better understand their impact and where things might go in the future. What Is NFT? NFT stands for non-fungible token. It is a digital identifier that certifies the ownership of some asset, physical or digital. Owners who wish to sell their assets can tokenize them via a blockchain-powered process that involves the creation of NFTs. Each NFT is unique as it has a specific set of ownership data. Because all the information is recorded on a blockchain, anyone can check the details of the NFTs issued. For the holders of NFTs, there is transparency and security in the fact that their ownership of the tokens is verifiable. NFTs have some intrinsic value and can be traded for money or cryptocurrencies. There are a variety of assets that can be tokenized into NFTs. Real estate, art, music, videos, and in-game items are some examples of assets that have been tokenized in the past. Since every NFT is a unique cryptographic token, it cannot be replicated and is non-fungible. We will talk more about the non-fungible part later on. NFTs are also compatible with smart contracts that can be used to execute certain transactions after the NFTs have been minted. For example, smart contracts can be used to automatically process royalty payments or trigger payments if the NFT is sold by its holder. Specific conditions that trigger transactions can be executed using smart contracts. How Do NFTs Work? NFTs are powered by blockchain technology. Blockchain is a digital ledger system that is decentralized and not controlled by a central authority. The process of creating NFTs is called minting. In minting, a new block in a blockchain is created. Each token is then assigned to a blockchain address. Each token is associated with one owner. The information of that owner including his/her address is recorded in the block. The token resides in that address. All of the NFT information is finally validated and the block is closed. The information stored in the block is publicly available for anyone to verify. An NFT minting process can involve any number of NFT tokens. The key is that each token will have a unique identifier associated with it and that is what makes the tokens non-fungible. How Are NFTs Different From Cryptocurrencies The non-fungibility aspect is the difference between NFTs and cryptocurrencies. If there are two bitcoins, they are treated the same by their holders or transactors. One coin can be exchanged for another. The value of one bitcoin is the same as another bitcoin on an exchange. Different exchanges may have different values for Bitcoin, but the value of one exchange stays the same. However, each NFT is unique and has a unique identifier. One cannot be exchanged with another. Each NFT token is irreplaceable. Each token is almost like an identity card or a passport. NFTs are also extensible, meaning that two NFTs can be combined to create a third unique NFT. Benefits of NFTs NFTs offer several benefits that other forms of value-transferring vehicles don’t. Efficiency: The most direct benefit is that of efficiency. NFTs help cut out intermediaries and allow asset owners or sellers to link up directly with their target audience. Perhaps, the only intermediaries involved would be those that are adept at hosting NFTs securely. If an asset owner/seller knows how to do that, then there would be no intermediaries. Artists and asset owners have greater control over their work and investments. Security: The use of blockchain ensures that records are immutable and holders of NFTs can be confident that their ownership is unique, genuine, and can potentially appreciate over time. The record of ownership and certain personal information cannot easily be tampered with. Fractionalizing: NFTs can democratize investing in large assets like real estate or high-end art. Investing in a physical asset like real estate can be out of reach of smaller investors due to the large ticket size. However, NFT tokens can fractionalize the asset and offer access to smaller investors. This fractional ownership can also be transferred from one owner to another. If more people can purchase an expensive painting, the pool of buyers grows and liquidity also increases. Imagine trying to sell something where the pool of buyers is really small. What Does The Future Hold? The first NFT is believed to have been minted and sold back in 2021. The NFT was called Quantum and it was minted on the Namecoin blockchain. The concept of tokenizing assets goes even back further to 2010. NFTs initially grew in popularity as the general public learned about them and the concept gained traction. Art sales done through NFTs were popular and NFT marketplaces also attracted a lot of attention. However, after an initial surge, the popularity of NFTs appears to be waning. Celebrity endorsements of NFTs and famous personalities using NFTs to generate income are sustaining the popularity of NFTs. The sceptics of NFTs point to some of the disadvantages of NFTs. The first one is about environmental issues arising out of the mining process in blockchain-based systems. Cryptocurrencies also get a bad rep for this issue because mining farms can consume a lot of energy. Secondly, the NFT industry isn’t a regulated one and small investors can fall prey to scams. The decentralized form of a blockchain-based system also makes it difficult to ascertain fraudulent activity or copyright infringements. Lastly, NFTs can be highly volatile just like cryptocurrencies. Values can fluctuate wildly and those who don’t have a risk management system in place could face significant losses. If NFTs gain traction from institutional investors, they could become a more mainstream asset class. Any solution to environmental concerns can lead to NFTs getting integrated more with industries like music, arts, gaming, and real estate. About Cerus Markets Established in 2022, Cerus Markets is authorized and regulated by the Labuan Financial Service Authority, Malaysia. With a focus on innovation, Cerus offers a unique crypto derivative product that allows clients to trade over 200 instruments paired with cryptocurrencies. Alongside crypto derivatives, Cerus also provides trading opportunities in Forex, Commodities, Indices, Single Stocks and Crypto. We believe in empowering traders of all levels with easy and affordable access to the market. Our trading platform stands out from traditional brokers by not charging entry fees, various deposit methods and a wide range of digital assets starting from just $50 and leverage up to 400:1. Moreover, traders can benefit from a 100% Deposit matching bonus, doubling the amount of their first deposit and further enhancing their trading experience. Click here to create your account and start trading today!

Friday, July 28, 2023 Veronica Imasheva Education No comments

Copy Trading — What is it & How Does it Work?

What is Copy Trading? When the copy trading notion was born, it changed the entire industry dynamic. Allowing beginner traders to copy professional traders’ trades into their account – replicating their performance to make money, was something very new on the scene. Now, it is already a matter of casual application. So why is copy trading so popular? Well, in the case of beginners – it saves you the share of money you are likely to lose in the first days of your trading journey, letting you observe professional trader behavior and learn from it, while in the case of experienced traders – it is a valuable storage of new ideas and strategies. How does it work? Copy trading connects a part of your portfolio to the portfolio of the trader, whose actions you want to copy. Once you start copying a trader, all their currently opened, as well as future trades, are copied into your account. With Copy Trading, you invest a certain sum of your choosing with a typical ceiling of 20% of your portfolio. The sum you invest then becomes a percentage of the trader’s portfolio. Example: if you invest $200 into copying a trader, and the trader’s portfolio is worth $2,000, your investment is 10% of his portfolio. If he then opens a trade for $200, you will copy this trade, but the money that will be invested from your account is $20 (because that’s 10% of the sum that he invested). How does the trader that’s being copied make money? Via so-called copy commissions that he gets from each and every one of his followers. He basically gets to harness his knowledge and experience for an extra passive income. Fair, isn’t it? Copy Trading Benefits First and foremost, manual trading can be intimidating for newbies. Once charts and patterns come into play – it is a whole new world, which leaves many paralyzed. Indeed, there is a lot to learn, and risking your investment when you don’t know what you are doing adds some psychological pressure. In turn, Copy Trading does not require much trading knowledge. Traders can observe and learn by watching what experienced traders do, as well as draw inspiration from other people’s successes and failures. Additionally, it is a way to save time when starting to trade, as well as a way to diversify your investment. Copying different signals of different traders with different styles can not only help one check out different asset classes, but also help understand which trading style one will be willing to adopt in the future. Copy Trading Risks Like everything in the trading arena, copy trading isn’t all rainbows and butterflies, it comes with its own share of risk. Every year, regulators expose a variety of copy signal provider group scams, where untrustworthy traders fish out money from unsuspecting copiers under false pretenses. And even if we don’t consider scam, choosing the right copy strategy provider is a challenge. First and foremost, no trader can entirely avoid market downfalls. Even though you may have analyzed the winnings and charts of the trader to copy, there is still no guarantee that his strategy will last. Then there are the increased costs due to the commission fees paid, as well as the reliance on someone else’s expertise, instead of your own. While to some copy trading has proven a golden learning opportunity, others claim that nothing beats a hands-on figure-it-out-yourself approach. About Cerus Markets Established in 2022, Cerus Markets is authorized and regulated by the Labuan Financial Service Authority, Malaysia. With a focus on innovation, Cerus offers a unique crypto derivative product that allows clients to trade over 200 instruments paired with cryptocurrencies. Alongside crypto derivatives, Cerus also provides trading opportunities in Forex, Commodities, Indices, Single Stocks and Crypto. We believe in empowering traders of all levels with easy and affordable access to the market. Our trading platform stands out from traditional brokers by not charging entry fees, various deposit methods and a wide range of digital assets starting from just $50 and leverage up to 400:1. Moreover, traders can benefit from a 100% Deposit matching bonus, doubling the amount of their first deposit and further enhancing their trading experience. Click here to create your account and start trading today!

Wednesday, July 26, 2023 Guillermo Angel Education No comments

Understanding Contracts For Difference

If someone told you that there is a bakery where you get “dough” but no physical delivery, you would probably say WHAT! However, with CFDs, you might be able to make some dough without taking physical delivery of the underlying asset. But, you have got to be careful, as CFDs can make profits disappear faster than a rabbit in a hat! You must be wondering how random all of this is. Don’t worry, we won’t do any magic tricks nor feed you any dough. Rather, we will talk about what a CFD is, how you can trade it, and hopefully make some “dough” in the process. Besides making profits, we will also discuss the risk factor of CFDs and talk about some of the ways you may want to manage the risk of trading CFDs. We will discuss some strategies that could be used when trading a CFD and how you can go about selecting which market to trade CFDs in. Sounds good? Then let’s dive right in. What Exactly Is A CFD? CFD stands for contract for difference. It is a trading instrument that allows a trader to trade an underlying asset without actually taking (or giving) delivery of that asset. CFDs are cash-settled and the trader earns a profit or loss of the difference in the trade-opening and trade-closing price. Besides the price-settlement factor, the major benefit of trading CFDs is leverage. CFDs are leveraged instruments which means that a trader can take a position worth a large amount by paying a fraction as a margin. Depending on the leverage ratio offered to the trader, a trader can put up as little as 5% or 3% of the money needed to take a trading position. For example, if a trader wants to buy 1,000 shares of Nvidia shares priced at $400, the trader would have to pay $400,000. However, if an Nvidia CFD is available with a leverage ratio of 10:1, the trader only has to put up $40,000 to take a position worth $400,000. You might wonder how this can boost returns. If Nvidia goes from $400 to $440 (a 10% move), The value of the trader’s position goes from $400,000 to $440,000. It is a profit of $40,000 on a capital of $40,000. But, consider what happens if the price falls by 10%. The value of the position goes down to $360,000 and the entire $40,000 put up by the trader is lost. So, leverage is a double-edged sword that needs to be handled carefully. Selecting The Right Market For Trading CFDs Now that you know how extreme CFD trading can be, one very important question to answer is which market to trade CFDs in. Our suggestion is to pick the market that you best understand. If you are good at following the US markets and understanding the actions of the Federal Reserve, then it makes sense to trade an S&P 500 CFD or a Dow Jones index CFD. If you closely track a company, say Apple or Amazon, then you may want to trade an Apple or Amazon CFD. The idea is to pick a market that you understand and about which there is plenty of information freely available to you. It is through this information that you will update your knowledge about the market. If you don’t have access to or are not aware of the nuances of the South African stock market (for example), then you probably should not trade a South African index or stock CFD. You also may want to consider the volatility of a specific market. Is that level of volatility compatible with your style of trading and your psychology? Are you someone who relishes high volatility or do wild price moves make you fearful? Lastly, you may want to analyze the liquidity of the market or asset that you wish to trade. Wanting to close a trade but not being able to do so due to a lack of buyers/sellers or putting up with a high bid-ask spread can erode significant returns or even cause losses. Being able to enter and exit trades without high impact costs is important for any trader. Some Basic Trading Strategies For CFDs Conceptualizing strategies to trade CFDs is similar to conceptualizing strategies to trade stocks or indices or commodities. You can try looking at your preferred technical indicators like the moving average. For example, if the 20-day moving average crosses over the 50-day moving average, you may consider going long or buying CFDs. If the price falls below the 200-day moving average or if a shorter-term moving average goes below the longer-term moving average, then you may consider going short or selling CFDs. You may also study the price action, find important levels, or use indicators like the Fibonacci retracement. When the price gives you a signal at an area of value, you may consider going long or short as your analysis may indicate. You could also backtest the price data of certain assets and try to find patterns like what happens on a specific day of the week if the previous day was up or down. If you can find any pattern or behavior, you may try to trade that with CFDs. Final Words Any kind of trading comes with risk. In order to manage such risk, you may want to think about your stop loss levels and position sizing. You may also want to know what your risk-reward ratio is for each trade and what the maximum amount is that you are willing to lose. Once you know your maximum loss tolerance, you can work out the number of CFDs that will keep your possible losses within that limit. Staying on top of the market with alerts is also a useful thing to do. Cerus Markets specializes in CFDs and covers a variety of markets including stocks, indices, commodities, and cryptocurrencies. If you think you are ready to trade them, then our 100% welcome bonus offer for new sign-ups is a great way to begin.

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