23 de março de 2018

What Can the Broker NordFX Offer to Crypto-Traders | Comparison of Cryptocurrencies Trading with Brokers and Crypto Exchanges | Leverage Ratio 1: 000 - Happiness or a Nightmare for a Trader



While many brokers, frightened by high volatility, give up majoritarian cryptocurrencies trading, the brokerage company NordFX, has on the contrary provided its customers with a leverage ratio, exactly 1000 times (!) higher than their own funds. Due to this, profits on transactions with bitcoin and other cryptocurrencies can reach thousands of percent. But this can only happen in experienced hands. As for amateurs, they can easily turn this powerful financial weapon against themselves.

The main difference between brokers and exchanges is that with the former one can profit not only from a rise but also from a drop of cryptocurrencies. If, for example, you have bought Bitcoin for $20,000 on the exchange, and a month later it fell to $10,000, you have two options: either sell it with a loss of 50%, or wait, hoping that the Bitcoin price will ever go up.

As for brokers, thanks to contracts for the difference in prices - CFD - you can make a profit even if the cryptocurrency collapses to zero.


Like many other things in the world of finance, CFD were invented in England, and initially it was a transaction of buying / selling shares, but without registering ownership of them, which allowed to avoid paying fees.

Naturally, this method of trading quickly became popular, and contracts for the difference in prices started to be concluded for other assets - currencies, precious metals, commodities, and now for cryptocurrencies as well. At this, there is no actual transfer of these assets from the seller to the buyer. This is what makes it possible to earn on falling prices.

If putting it simple, the contract for the price difference is something like a bet that you conclude with a broker, as to whether the price of Bitcoin will go up or down. In this case, you choose the moment of the bet start, that is, the opening time of the transaction, and the time of its closing. And it depends on you as to how long it will last - one minute or one year and longer.

And if at the moment when Bitcoin price has reached $20,000, you decide that this is the maximum and further it will only fall, you can open a CFD transaction for its sale. having closed it at $10,000, you will not lose but have profit of 50%.


But that's not all, as thanks to the leverage ratio of 1:1000, your profit may not be 50, but 50,000%. 

Let us explain for freshers that the leverage is the amount of money that the broker provides the client with, automatically and without any collateral, for transactions in the financial markets. With the help of leverage ratio of 1: 1000, a trader or investor can make transactions with a volume up to 1000 times that of his own funds.

Thus, having only $100, you get the opportunity to conclude CFD transactions for up to $ 100,000. That is, you can buy or sell 10 Bitcoins, 100 Ethereums, 500 Litecoins or 100,000 Ripples. (To date, NordFX offers trading on six major cryptocurrencies).  


It would seem that it remains only to open a trading account, put a hundred dollars there and have an empty wardrobe in your apartment, where a week later you will put your first million. However, in reality, unfortunately, it is not as good as it seems at first glance. The fact is that if the price goes against you, the broker will immediately close your transaction, as soon as the loss reaches the very $ 100. And this can happen almost instantly, because for this it is enough for the price to move by only 0.1%.

This is what the opponents of big leverage say all the time, considering that it inevitably leads to the loss of all funds.  However, for some reason, there is only one trading "strategy" - when a trader opens a single transaction for the whole (!) amount of your deposit with a maximum leverage ratio of 1: 1000. And in this case it is not even worth arguing - the probability of collapse is 100% or at least 99.99%.

Leverage is just a tool, an additional bonus, and it is for the trader to decide whether to use it or not. And if it is used, to what extent. Nobody forces anyone to do anything.


And now a very simple example that will show how useful a large leverage can be even in the most difficult trading situations.

Suppose, with the current price of $10,000, you conclude a transaction with a volume of 0.1 Bitcoin. To open such a position without a leverage, you will need an amount of $ 1000. (In practice, we also need to take the broker commission into account).

With the same leverage ratio of 1: 1000 you only need ... just one dollar for this. And $ 999 will be in reserve in case you have made a mistake with the direction of the transaction, and the price has gone against you. In this case, even using the method of averaging loss-making positions, you have a much better chance of getting out of the drawdown and eventually profiting.

If the price has gone where you need, your profit will be the same, with or without the leverage, since the volume of the transaction was the same - 0.1 Bitcoin.

So, let's repeat: the leverage is just an instrument, and it depends solely on the trader himself as to how to use it, his caution and his financial appetites (in other words, greed, which usually does not lead to anything good).


In addition, when working with CFD, you cannot forget about another useful thing - the ability to hedge your risks, while simultaneously opening more than one transaction, some to buy Bitcoin, and some to sell it. Or, one can operate several cryptocurrencies at the same time, earning on the difference in their rates even with minimal price fluctuations, which is possible only thanks to a large leverage.

Well, finally, as a cherry on the cake, we should add that trading cryptocurrencies in NordFX is carried on the world's most popular trading platform MetaTrader 4. According to recent surveys conducted by the Finance Magnates magazine, the majority of traders (61.44%) use technical analysis in trade, and it is for this platform that the greatest number of scripts, indicators and advisory robots are developed, not only helping in making trading decisions, but also allowing to carry out trading in a fully automatic mode.

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