What are CFDs? Trade cryptos with PrimeXBT – sponsored

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RIO DE JANEIRO, BRAZIL – The world of finance is large and dense, with a variety of products, services and instruments of all kinds. There are standard buying and selling, of course, but the trading gets especially deeper as you descend into the derivatives den.

Derivatives are a type of financial instrument or contract based on the price of an underlying asset. Derivatives are also broken down into futures, options and CFDs. Each popular derivative contract type offers unique benefits and risks, with CFDs acting as the ultimate in flexibility, which is well explained in this guide.

WHAT ARE DERIVATIVES?

Traders in the spot markets are only obligated to buy and sell assets. And because knowing when the exact high or low is reached, spot traders often have to hold the bag as asset prices continue to fall. They tend to only make profits in bull markets, and bear markets either lead to losses or a pause in returns.

This is where derivatives come in. With derivatives, no assets are actually traded and, instead, contracts are settled in cash, crypto, or other base account currency. Traders can also profit from both directions of the market with long and short positions, and are not required to own or sell anything.

Avoiding exposure to assets like crypto and instead trading contracts like the ones mentioned below is a very attractive alternative for those who are not interested in custody of their assets.

THE MOST COMMON TYPES OF DERIVATIVES ARE:

FuturesFutures are a type of derivative contract that allows traders to speculate on the future price of an asset. Buyers and sellers of futures contracts are required to settle the contract on or within a future date called expiration. If the future prediction is correct, the trader settles the contract in profit. If the future prediction is incorrect, the difference determines the total loss. Traders are willing to risk losses in exchange for a potential return.

Options Options are similar to futures contracts, however, traders are not required but rather have the option to settle the contract on or before the contract expires. Because settlement is optional, options carry less risk. However, the options include an expensive initial premium in exchange for reduced risk and potential reward.

CFDsCrypto derivatives also include CFDs CFDs meaning contracts for difference which allow users the ultimate flexibility in the trading markets. They allow traders to be long and short in the markets so that they can profit both ways like options or futures, but are not tied to any period or expiration. At any time, traders can enter or exit CFDs offering the greatest overall flexibility. CFDs also allow more exotic trading pairs, making them attractive to brokers and users.

CFDs OFFERED ON PRIMEXBT EXPLAINED

PrimeXBT is an award-winning CFD trading platform, which abandons options and futures and instead offers unparalleled versatility to the global trading community as a whole. Because PrimeXBT relies on CFDs to power its range of trading instruments, the choice is much more varied.

As a multi-asset margin trading platform, the base account currencies range from BTC, ETH, USDC and USDT, however, using them to open margin accounts allows traders to access forex CFDs, crypto, commodities, stock indices, etc.

Across crypto, there is Bitcoin, Ethereum, Litecoin, Ripple, and EOS. Among stock indices, the most popular national indices are included, such as the Dow Jones, S&P 500, DAX, FTSE and more. Major forex currencies and exotic pairs are also included, along with gold and silver. Commodities such as oil and natural gas also join the range of instruments.

WHY YOU SHOULD TRADE CFDs WITH PRIMEXBT

The power of CFDs combined with PrImeXBT’s advanced trading tools such as long and short positions, stop-loss orders, built-in charting software and much more, allows even newcomers to create successful trading strategies and carry them out.

There’s also a plethora of risk prevention tools, a mobile app for managing positions on the go, and some of the most robust security features in the industry. With competitive fees, free registration and innovative experiences like the Covesting copy trading module, PrimeXBT is a one stop shop for CFD trading.

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