CFD Trading - what is it?
CFD trading is speculating price movements via your CFD trading account. This means that your goal is to earn from price movements between crypto/crypto or crypto/fiat pairs and you don't actually own any crypto you trade.
Imagine your friend is putting a house on the market and invites bids to be made. You bet with another friend on whether the bids will be higher or lower than the list price.
You don't own the house, but if you win your bet, you earn money.
That's sort of what CFD trading is, you're speculating the price of cryptocurrencies without actually owning the underlying coins.
You can buy a crypto (go 'long') if you think the price of the crypto will rise or you can sell a crypto (go 'short') if you think the price will go down.
CFD trading normally offers you leverage, which allows you to trade with 5 to 500 times more money than you actually have.
This means that you can start trading with very small deposit.
Even if you deposit just $10, you might be able to trade for up to $50 or even $5000.
And you can earn gains from the total amount.
Of course, this means that you can gain more money faster, but it also makes it easier and faster to lose our deposit.
CFD Trading vs. HODL
CFD trading is an easy way to get fast gains and you never own the underlying assets. You are just speculating on the price movements and you do that on CFD trading platform.
If you HODL, you buy the cryptos on a cryptocurrency exchange and you actually own all the cryptos you buy. Some of the best known cryptocurrency exchanges are Binance, Kraken, and Coinbase.