Plus500 is a popular CFD trading platform. As well as stocks and forex, Plus500 also offers cryptocurrency cfd trading including in Bitcoin.
Bitcoin has been gaining more and more attention over the past 12 months. There has also been a huge amount of price volatility. If you managed to get in at the right time, there was potential for huge profits. Here is my short guide on trading Bitcoin on Plus500:
CFDs or Contracts for Difference, are a financial instrument which allow traders to reap the profits or losses from the price movements of an underlying asset. The trader is able to make a profit, without having to actually take ownership of the asset – in this case Bitcoin.
One of the advantages of CFDs is that traders can open both long and short positions. When you open a long position (buy), you’ll make a profit if the price rises. If you open a short position, you’ll profit when the price falls.
What to watch out for
Trading Bitcoin CFDs is risky. To help you understand some of the pitfalls, here are some things to watch out for:
Leverage increases the size of the trade without increasing the amount of capital needed. For example, with a 1:20 leverage, a $5 position allows you to control $100 of the underlying asset.
Leverage makes it possible to earn larger returns with smaller amounts of capital, but it also increases the risk. If the market goes against you, your losses will also be magnified.
On Plus500 it’s not possible to open a non leveraged position. This is something to watch out for.
Expiry Date of Contracts
Some CFDs expire at the end of the day. When they expire the position will automatically be closed at the current price. Currently Plus500 doesn’t close Bitcoin positions on a daily basis.
A premium is a fee that is subtracted from the position if it’s held overnight. Currently its less than 0.04%, so it’s not much. But again, it’s something you need to be aware of
For Experienced Traders Only
Trading Bitcoin CFDs is for experienced traders only. There is a lot of risk involved and you can potentially lose your entire account balance on a single trade.
If you’re new to investing, then I would recommend trading bitcoin on a copy trading platform like etoro, where you can make use of more experienced investors. If you do want to use Plus500, then make sure you start with a demo trading account.