Trading Crypto CFDs - Complete Guide 2022

Trading Crypto CFDs - Complete Guide 2022

Cryptocurrencies such as Bitcoin, Ethereum, and Ripple have already taken their place in the online investment sphere today, with billions of dollars in transactions every day.

Most traders prefer to trade in pairs involving some cryptocurrency and the U.S. dollar. Other traders exchange one cryptocurrency for another. Either way, the main goal is to make money from constant changes in cryptocurrency rates.

In this guide, we will cover everything you need to know about cryptocurrency trading. We will explain how altcoins were formed, what risks and strategies you need to consider when trading, and how to start trading cryptocurrencies today.

Crypto Trading Meaning - A Brief History

Thanks to the creation of virtual money, a new cryptocurrency market and an entire industry with a capitalization of more than $2 trillion have formed. Thousands of decentralized applications are being created based on existing blockchains. Thus, we can now witness the large-scale implementation of what was only an idea 30 years ago.

Back in the 1960s, professional cryptographers were discussing the possibility of creating a global information network. The first practical steps in this direction were made in the '80s. With the help of infonet the exchange of brokerage data, which was necessary for trading on exchanges, was begun.

At that time, American cryptographers David Chaum and Stefan Brands were working on the realization of the idea of digital money. They described the principles of an anonymous digital payment system, as well as proposed the first "e-cash" protocols.

In 1990, David and Stephan created DigiCash. It had a function to support the privacy of electronic payments and had cryptographic data protection.

The main difference between eCash and modern cryptocurrencies was its centralized management. In 1998, this platform went bankrupt. But the very idea of using quick anonymous payments has been noticed by many coders.

A significant contribution to the formation of cryptocurrency was made by Adam Back. It was he who in 1997 used HashCash - technology, resistant to spam and DoS-attacks. Later its improvement was engaged, Hal Finney. He managed to create a more advanced algorithm for the control of electronic payments. The essence of the improvement was the introduction of hash-blocks in transaction processing.

HashCash technology became one of the key concepts in the process of creating the first blockchain. Based on it, two developers independently launched their digital projects in 1998:

  • Wei Dai - the B-money project;
  • Nick Szabo - the Bit-Gold project.

Each of them used a decentralized registry as the basis for the system. In fact, these projects became the prototypes of cryptocurrency. Satoshi Nakamoto would later refer to B-money as the fundamental technology for the development of Bitcoin. The first blockchain was created by Hal Finney in 1998, and sometime later he would join the Bitcoin project.

Thus, blockchain technology and cryptocurrency are the results of the efforts of a group of people. But the final step in realizing the idea of digital money was made by an anonymous developer under the pseudonym Satoshi Nakamoto.

Who exactly is hiding under the name Satoshi Nakamoto - still not reliably known. It is believed that the pseudonym was used by a whole group of specialists. Everything began in 2007 with the formation of the idea of a decentralized blockchain and Bitcoin cryptocurrency version 1.0.

Over time, more and more professional programmers came to the Bitcoin community, trying to improve this technology in one way or another.

The Growth of Alternative Digital Currencies

After the triumph of Bitcoin, enthusiasts began to copy the idea with minor changes and try to create a more popular independent digital currency. Nowadays, altcoins are very different from each other. Their number is growing every day, and all of them are created to solve different problems.

The key reasons for the growing flow of new altcoins are decentralization and blockchain technology, which allow the creation of an unlimited number of coins.

The first alternative digital asset to Bitcoin was Namecoin (NMC). And the most promoted competitor was Ethereum (ETH), a project of Russian-Canadian programmer Vitalik Buterin. Dogecoin, Litecoin, Ripple, Bitcoin Cash, Cardano, and many others also stand out among altcoins.

Developers of altcoins primarily try to solve the problems that are present in Bitcoin, although the first cryptocurrency from time to time receives major updates.

Such shortcomings usually include:

  • A long time of transactions.
  • Lack of anonymity.
  • Expensive mining.
  • Insufficient functionality.

Altcoins can be divided into three groups depending on their characteristics:

Unique altcoins. These are altcoins that have exclusive technologies that Bitcoin does not have. For example, Ethereum with smart contracts, IOTA with directed acyclic graph (DAG) technology, or Dash with the ability to transfer funds via SMS.

Stablecoins. They are designed to hedge financial risks. The exchange rate of stablecoins is tied to the exchange rate of the currencies (assets) for which they are issued. The most popular stablecoin is Tether, which is pegged to the U.S. dollar at a 1:1 ratio. Thus, a user of cryptocurrencies gets an opportunity to exchange their existing altcoins for Tether, thereby fixing the value of altcoins in U.S. dollars on a certain date. In other words, they are a kind of digital safe-haven assets or assets protected from volatility.

Anonymous altcoins. These are confidential cryptocurrencies aimed at users who want to hide their digital assets and personal data from prying eyes. They encrypt the very movements of funds, allowing them to keep information about their movement from sender to recipient secret. This type of altcoin has drawn the strongest criticism from global governments and financial regulators, who call it a tool for money laundering and terrorist financing.

What Are the Other Significant Cryptocurrencies?

Today, there are more than 7000 different cryptocurrencies on the market, and the digital economy is still actively developing. At any moment, a new digital coin can be released, capable of breaking into the ranks of the most famous coins.

Let us have a look at some other popular cryptocurrencies.


The goal of Litecoin cryptocurrency development was to create a lighter version of Bitcoin. Its developers, led by Charlie Lee, a former Google employee, have always positioned Litecoin as "digital silver". The coin differs from "digital gold" in its lighter hashing algorithm and high transaction processing speed. It takes 2.5 minutes to create a block on the network, compared to 10 minutes on the Bitcoin network.

Along with Bitcoin, the coin is accepted for payment by many merchants, is presented on all cryptocurrency exchanges, and is actively used for private transactions.


Ethereum or Ether (ETH) is a coin of the decentralized blockchain-based application creation platform of the same name. Using smart contracts, Ethereum developers can easily launch decentralized applications (DApps) and their own cryptocurrencies. The launch of the platform in 2014 was a real breakthrough in the industry, allowing it to grow so rapidly.

And while Bitcoin is often compared to gold, Ethereum can be called the "digital analog of oil," as the coin is essential for the platform's operation. ETH can be used in several ways:

  • Developers when they want to create their project;
  • Investors who want to buy coins launched on the platform;
  • Traders who make money on exchange rate differences.

So far, Ethereum's trading volume is almost half that of BTC`s, but the platform's potential is high and is constantly attracting new investors.


Ripple ranks fourth in terms of capitalization, with a token price of less than $0.7. Unlike many other coins, Ripple is not an altcoin designed to create decentralized money. The Ripple network has a different goal - to provide users with the free exchange of assets with instant transactions. The developers seek to create and develop a blockchain-based payment network that could be adopted by banks and other financial institutions.

The Ripple network protocol allows:

  • Make interbank payments similar to the notorious SWIFT system - with instant speed;
  • Reduce transaction costs by 40-70%.

The cryptocurrency's functionality is not limited to this. Theoretically, it is possible to create a global online market with instant exchange based on the Ripple network.


Tether (USDT) has relatively recently made the list of the most popular cryptocurrencies. The coin belongs to the category of stablecoins - coins, the rate of which is backed by more stable assets. Tether is backed by the U.S. dollar at a 1:1 ratio. It eliminates volatility and makes the coin more convenient for payments and transactions.

Tether solves one of the main problems of cryptocurrencies associated with high volatility, which prevents their widespread use. The cryptocurrency is based on the Omni Layer protocol, using which users can exchange their USD to USDT and then make a reverse exchange to dollars.


EOS is a platform for creating decentralized applications. The goal of the project is to make it as easy as possible for developers to master blockchain technology. The platform provides some tools and tutorials for creating DApps. EOS aims to improve the interaction between users and companies and provide a more scalable network than other blockchains.

The EOS network was launched in 2018 and immediately sparked heated discussions in the community. Many analysts predict a grand future for the project. The success of the platform also affects the popularity of its namesake cryptocurrency, which fuels the system.

Cryptocurrency Codes

Similar to all other currencies, digital ones are also expressed as "opposition" to another currency, but here they are represented in the pair with the USD. So, here are the codes for you to know what symbols to look for in the trading terminal:

  • Bitcoin vs. US Dollar - BTC/USD
  • Ethereum vs. US Dollar - ETH/USD
  • Litecoin vs. US Dollar - LTC/USD
  • Bitcoin Cash vs. US Dollar - BCH/USD
  • Ripple vs. US Dollar - XRP/USD

Why Trade Cryptocurrency with CFDs?

A CFD is an agreement between a trader and a broker. If a trader buys a Bitcoin CFD, he does not own the cryptocurrency itself. He only owns the contract, which specifies at what price he bought the coin. At any time, the trader can close the position and return his contract to the broker. If his forecast was correct, he will receive an appropriate reward. In the case of an error, the same amount will be deducted from his account. With CFDs, traders can bet on both growth and decline.

To understand the basics of CFD trading, it is worth remembering some of the most common terms and concepts.

  • Long position - it is an order you place if you think the market will go up.
  • Short position- you open it if you are preparing for a decline.

Spread - the most common way to compensate a CFD broker. The spread is the difference between the bid and ask prices. For example, a broker sells Bitcoin (BTC) for $33,100 and buys it for $33,000. In this case, the spread is $100. The broker makes most of the money from the spread.

Leverage - allows you to increase your effective capital. European brokers regulated by CySEC or FCA have a maximum leverage of 2:1. It allows doubling your profits if you forecast correctly. However, leverage not only multiplies profits but also increases losses proportionally.

Speaking about the pros of CFD trading we should mention first that transactions are executed very quickly and allow you to bet not only on the growth but also on the decline of cryptocurrencies. In addition, anyone can open a free demo account that does not require an initial investment. It allows novice crypto traders to practice and get familiar with the market. Finally, you can start trading with as little as $1000 and get support from your broker at any time.

Still, there are some cons you should consider. Most brokers offer an extremely limited set of cryptocurrencies. As a rule, no more than 12 digital currencies are available; often, there are no more than six.

How Does Mining Fit into All of This?

Mining is the process of "making" cryptocurrency, most often Bitcoins, which is due to their increasing demand and popularity on the market. Essentially, the owner of a computer, using its resources to operate a virtual payment system, collects and processes information about cryptocurrency transactions. This activity is necessary for the transactions to process, to ensure a high degree of security, as well as the smooth functioning of the entire peer-to-peer decentralized system. The greater the number of miners and, consequently, computer resources involved in the process, the more reliable and stable the system is.

The owner of the computer receives remuneration in the form of a commission assigned by the owner of the virtual money, or remuneration in the form of a part of the cryptocurrency emitted in the process of mining. It is the basis of one of the main principles of payment systems, involving the use of Bitcoins and some other virtual money. The transactions where the highest commission is set are processed and conducted first. Therefore, transactions with zero commission can take a very long time.

Risk-Free Trading With AdroFx

How can a beginner learn to trade without risking his own money? You have to practice opening and closing positions, see how the terminal works. If you start trading on a real account right away it will be pretty expensive. Without experience in trading, it is foolish to hope that everything will go well with the first deposit. That is why all the newbies should open a demo account before live trading.

Each broker offers an opportunity to open such an account so that beginners can practice on it without testing the fate of their money. AdroFx offers its clients unlimited demo accounts where you can get acquainted with the platform and trading itself.

How to trade Bitcoin CFDs

Trading crypto CFDs is quite simple. You select the asset you are interested in and place an order. Think the price of Bitcoin will go up? Open a long position! Correspondingly, if you believe the price of the asset will fall, open a sell position. If the price changes in the direction you predicted, you earn a profit equal to the difference in the price when you open and close the trade.

Ethereum vs Bitcoin

Bitcoin and Ethereum are now the most expensive cryptocurrencies, according to leading analytical sites (unless you count Bitcoin Cash). Bitcoin has a market capitalization of over $600 billion, and Ethereum has a market capitalization of over $400 billion.

If we talk about similarities, we can stop only at the most general fundamental points, in other respects, Ethereum and Bitcoin are very different. So, what do these ecosystems have in common?

Both are cryptocurrencies, can be used as a means of payment for goods or services, and can be transferred from sender to recipient, replacing the standard banking system to a certain extent. In addition, these digital coins can be bought and sold.

Both are based on blockchain technology, in which all blocks of transactions are inextricably linked together in a single chain. They allow you to operate your tokens without revealing the identity of the parties, i.e. they maintain the anonymity of the users.

Both have a decentralized transaction confirmation mechanism; they do not depend on the failure of one or some nodes and are not regulated by any government regulatory agencies.

Both have a Proof-Of-Works mining algorithm that requires miners to perform complex arithmetic calculations on their hardware. Ethereum has now begun the process of gradually switching to the Proof-Of-Stakes protocol, which is proof of ownership, but when the system will fully switch to PoS is still unknown.

Given the fact that the rate of digital coins depends entirely on the supply and demand ratio, both cryptocurrencies are highly volatile (as, indeed, all other cryptocurrencies). Their rates can change several times in a few weeks or even days. But this is where the similarities end and the differences between the systems begin.

Choosing what is better, Bitcoin or Ethereum, it is necessary to take into account when and for what these systems were created, otherwise, the comparison will not be correct. Let's start with Bitcoin.

Bitcoin was the same money, only existing exclusively in electronic form, uninfluenced by the state and maintaining the anonymity of its owner.

Such cryptocurrency is needed by any individual or legal entity that wants to buy or sell any services or goods using it. In this case, no one will be able to block his account, trace the origin of money and transactions with it.

If we consider Ethereum, however, we see a completely different picture. This platform was launched in 2014, and its main purpose was not just to present another payment tool, but to give users a new and unique offer. Such an offering was a multifunctional blockchain-based platform, which includes:

The ability to enter smart contracts between parties based on the decentralized applications available on the platform. Thanks to these applications, the blockchain can automatically verify the parties' compliance with the terms of the transactions and execute them, eliminating the human factor.

Users can use Ethereum to create their own token using open-source code. For the sake of fairness, it should be said that in the Bitcoin network it is also possible to create smart contracts, but it is much more difficult to do so because of the complicated programming language and tools offered.

Now we know the fundamental differences between Ethereum and Bitcoin in terms of the scope of application of these systems.

Advantages of Trading Crypto CFDs

There are quite lots of assets that can be traded online. Whether it's stock trading, commodity trading, ETF trading, or bond trading, each will suit a different type of investor.

If you're not sure if cryptocurrency trading is right for you, below you'll learn about some of the benefits of this type of trading.

Short- or Long-Term Trading

Although the focus of crypto CFD trading is mostly short-term, it should be noted that it is also suitable for long-term investors. Many investors today are interested in buying digital currencies such as Bitcoin because they believe they will be worth much more in the future.

By choosing a strategy known as "buy and hold," you will buy and hold your chosen cryptocurrency for months or years.


If you trade cryptocurrencies through a broker, you can apply leverage. Leverage allows you to trade with more money than you have in your account. According to the regulations of the European Securities and Markets Authority (ESMA), brokers are allowed to offer leverage up to 1:2 in cryptocurrency trading. That is, the amount you invest can double.

For example, if you place an order to buy BTC/USD for $50,000, you can actually invest $100,000 in your purchase.

Short and long positions

When you buy shares from a traditional broker, you do so believing that the value of that company will increase. Most investors are comfortable opening long positions alone, but these positions will not allow you to profit from a falling market. Cryptocurrency trading is set up quite differently, as there is always the possibility of opening both long and short positions. Long positions are opened when you believe that the value of the cryptocurrency pair will fall. This way, you will be able to earn regardless of the direction of the broad market.

Trading 24/7

Markets for traditional investment items, such as stocks and bonds, are open during standard business hours. Suppose, for example, that it's Friday night and you want to sell your stocks. In most cases, you won't be able to do that until the markets open Monday morning. Likewise, you might want to sell your shares over the weekend, but many brokers won't allow that.

The good news is that cryptocurrency markets are open 24 hours a day, 7 days a week. It means you can open and close a position at any time - no matter where you are.

Learn to Become a Crypto CFD Trader

If you are new to crypto trading and learning it from scratch, it can be easy to get confused, not knowing where to start. Self-educating is just the beginning of the journey. Its purpose is to set the vector for further development. Here are a few ways to start learning how to trade crypto CFDs.

YouTube. Video lessons and webinars are popular as they help show how to trade at the financial markets in real-time. Such material is quicker to absorb, and there are fewer questions.

Online universities

There are online universities that offer courses on crypto trading for both beginners and advanced traders. There you can find a lot of useful information.

Forums and analytical resources. There you can read publications of experienced analysts and traders, as well as communicate with other traders, share experiences, understand mistakes in trading, etc.

Crypto blogs and sites. Crypto analytics are published by many media websites, such as Cointelegraph or Coindesk. Data from the media can be useful for analysis: in this way, you will understand what the analysts pay most attention to, how these factors influence the market, and how to use them for your own analysis, strengthening your knowledge in practice. Rather, it will be a handy tool that will be hard to do without, but it is unlikely that you will learn the secret methods and effective strategies in crypto trading.

Risks Associated with Crypto Trading

Online cryptocurrency trading has many advantages, but potential risks must also be considered.

High volatility

The volatility of cryptocurrency pairs, especially less liquid ones, can be very high. For example, it is still not at all uncommon for cryptocurrencies to rise or fall by more than 10% in a day of trading. With popular assets such as stocks or bonds, this does not happen under normal circumstances.

That's why you should be sure to set reasonable Stop-Loss and Take-Profit orders on all of your trades. That way, you can reduce your losses and automatically lock in potential profits.

Unregulated Exchanges

A significant portion of cryptocurrency trading takes place on unregulated cryptocurrency exchanges. These are usually simplified platforms that have nothing to do with traditional money. All deposited and withdrawn amounts, as well as profits and losses, are denominated in digital currencies.

On the one hand, this is convenient for traders who do not want to present identification documents or want to apply higher leverage.

However, going to an unregulated cryptocurrency exchange is a big risk. That's why we highly recommend working with regulated and licensed CFD brokers. Then your funds will be protected in any situation.

Cryptocurrency Trading Programs

Investors of all types and categories are now using advanced programs that trade cryptocurrency instead. The basic algorithm is pre-programmed to meet strict trading conditions, thus avoiding the influence of emotions or traders' mistakes.

Cryptocurrency trading programs can scan the markets around the clock, and the number of tracked pairs is not limited in any way. It is very convenient for traders without sufficient trading experience and/or knowledge of the cryptocurrency market. Programs are also useful for those who would like to trade all day but are too busy because of other responsibilities.

There are hundreds of providers of cryptocurrency trading software. Many of them have a long history of helping traders consistently make successful trades, but others are best avoided because they make high-profile claims that are not backed by reliable data.

Nevertheless, when you find the cryptocurrency trading software provider you've been looking for, follow these steps:

First of all, buy the software by making a one-time payment. Then download this program to your PC. Next, choose an online broker that allows installing third-party algorithms to MetaTrader 4 (MT4). After that, download and install MT4 on your PC. Then log in to MT4 with your broker credentials. Finally, import the previously downloaded cryptocurrency trading software into the terminal.

After following all these steps, check the box in MT4 to allow this program to trade on your behalf. This program will open buy and sell positions for you and hopefully make money.

Note that cryptocurrency trading software is often referred to as cryptocurrency trading bots. These terms are used interchangeably and refer to a means of automated trading via MT4.

Cryptocurrency Trading Strategies

Now we can discuss strategy as well. Experienced investors always have some strategies they would like to implement. By mastering the many ways to buy and sell cryptocurrency pairs, you will increase your chances of getting rich over time in this market.

Popular cryptocurrency trading strategies include:

Swing trading. This is a flexible cryptocurrency trading strategy that is ideal for beginners. The essence of this strategy is to buy and sell cryptocurrency pairs when new trends emerge. Such trends may be short-term and observed for only a few days. However, swing traders, unlike investors engaged in action trading, do not have problems with keeping positions open even for several weeks.

And such a need arises when a cryptocurrency pair rises or falls for a long time. For example, if there is bullish sentiment in the ETH/USD market, a swing trader will try to keep his buy position open for the duration of that trend.

And when the mood in the ETH/USD market changes, he will close his position and place a sell order. This allows the swing trader to capitalize on market corrections.

Corrections in the market. All markets undergo corrections. In fact, a correction is a temporary end to an uptrend or a downtrend. Suppose, for example, that BTC/XRP has been rising for three weeks, and it has risen 40%.

The uptrend cannot go on forever, because, at some point, investors will want to take their profits. When that happens, the BTC/XRP exchange rate will change in the opposite direction. After all, if sellers outnumber buyers, the price will fall.

However, this market correction will not mean that the upward trend for BTC/XRP is over. Rather, it will mean it is on hold temporarily. With that in mind, a smart investor will try to open a buy position as soon as BTC/XRP corrects. That way, he will open a position at a lower price and be able to take advantage of its further rise.

RSI Indicator. This technical indicator is used by experienced cryptocurrency traders. It shows whether a given cryptocurrency pair is overbought or oversold.

If it is oversold, its rate will fall, but there are good chances for a correction. That is, there is an opportunity to place a short-term trade and catch a reverse movement before it begins.

If the RSI indicator shows that the cryptocurrency pair is oversold, the market may experience a buying wave. Then again, there is an opportunity to quickly open and close a position in the digital asset while waiting for a correction in the market.

Tips for Trading Crypto CFDs

If you've read our guide up to this point, you already know that simply opening a brokerage account is not enough to consistently make a profit. On the contrary, you need to learn a lot to increase the likelihood that your efforts will be successful.

With that in mind, here are five tips for trading cryptocurrency.

  • Work with regulated brokers

There are hundreds of online brokers and exchanges that allow you to trade cryptocurrencies. Other factors are important to consider, of course, but your broker should be regulated. Then your funds will be protected in any situation.

In addition, it is also important to minimize your expenses on trading commissions. In this regard, it is best to focus on platforms that allow you to trade digital currencies with as low commissions as possible.

  • Take a cryptocurrency trading course

Before you take the responsible step, refresh your knowledge, not only in the field of digital currencies but also your knowledge of trading principles. Learn, for example, how to effectively use exchange orders and trading strategies.

Also, learn how to conduct research and apply risk management tools to minimize potential losses. There are quite a few cryptocurrency trading courses that you can take from the comfort of your own home. Some can be taken at your own pace, which is very convenient if you have other responsibilities during the day.

  • Learn how to read charts

One of the main benefits of using a buy-and-hold strategy is that you don't have to worry about short-term price trends. After all, you simply buy your chosen cryptocurrency and hold it for a few months or years. However, if you're interested in trading cryptocurrencies in their true form, you'll only be watching for short-term changes.

Most cryptocurrency traders hold positions open for no more than one day. Even swing traders have an average of less than a week. With this in mind, you must learn how to read and analyze the charts. That way you will be able to identify emerging trends.

  • Practice

You can learn trading and test trading strategies without risking your capital.

  • Consider copy-trading

Many investors are not familiar with the phenomenon of copy-trading. For beginners, let's explain that this feature allows you to choose an expert trader with a long (and proven) history of outperforming the market.

When looking for such a trader, you can use various criteria - monthly returns, risk level, preferred cryptocurrency pairs, and average transaction duration. When you find such a trader, you can copy all his trades and make money passively.

An Easy Way to Get Started

After you have grasped the whole idea of cryptocurrencies and crypto CFDs, it's time to get started. At the very beginning, it might seem too confusing that is why we have prepared a simple-to-follow instruction for an easy start.

To start trading crypto CFDs, you'll need to choose an online broker. There are hundreds of CFD brokers, so there are plenty of choices. With that said, we suggest you read this article for more details.

Now, you will need to open an account with the CFD broker of your choice. First, you will need to enter some personal information. It will include your full name, home address, date of birth, and contact information. Make sure the information is correct, as you will need to verify it later.

Before you can deposit funds and start trading, you need to confirm your identity. Once again, the broker must remain in compliance with the regulatory requirements as well as anti-money laundering laws.

Don't worry, a verification process is easy, and you need to upload a few documents (ID and utility bill).

Once your identity is verified, you can fund your trading account. Supported payment methods vary from broker to broker, including bank transfers, e-wallets, and cryptocurrencies.

Now you can start trading crypto CFDs. The purchase of CFDs is done in the standard broker's terminal. For example, it can be MetaTrader 4 or a web platform working directly from the browser.

The process is no different from forex trading. The program for transactions is as follows):

About AdroFx

Established in 2018, AdroFx is known for its high technology and its ability to deliver high-quality brokerage services in more than 200 countries around the world. AdroFx makes every effort to keep its customers satisfied and to meet all the trading needs of any trader. With the five types of trading accounts, we have all it takes to fit any traders` needs and styles. The company provides access to 115+ trading instruments, including currencies, metals, stocks, and cryptocurrencies, which make it possible to make the most out of trading on the financial markets. Considering all of the above, AdroFx is the perfect variant for anyone who doesn't settle for less than the best.