When it comes to the trading market, cryptocurrency is a relatively new entrant. In fact, many jurisdictions haven’t even begun regulating these new forms of digital currencies. Since this type of currency comes with the ‘digital’ tag, it is potentially vulnerable to risks beyond the scope of traditional products in the financial market. This makes it even more important for you to trade cryptocurrency only with a licensed and regulated CFD broker.
Always Choose a Licensed Cryptocurrency Broker
There are hundreds of scam brokers who claim to allow cryptocurrency traders access to this market. It is highly recommended to choose a broker only if they are licensed with a regulatory authority in your country. You should check unbiased TradeLTD review from previous and existing traders before choosing the right broker.
The different government agencies that regulate cryptocurrencies in one or the other way in different jurisdictions include:
- Financial Conduct Authority (FCA) in the United Kingdom
- Cyprus Securities and Exchange Commission (CySEC) in Europe
- Commodities Futures Trading Commission (CFTC) in the United States
- Australian Securities and Investments Commission (ASIC) in Australia
When you choose a broker that is licensed and regulated, it means that their activities are monitored by the authority. They are prevented or checked from carrying out any kind of unethical activities. If any discrepancy is found, they have to face heavy penalties with the potential risk of being shut down.
Risks of Choosing Unregulated Brokers
You will come across hundreds of unregulated brokers who claim to offer cryptocurrency trading services. Most of these brokers draw clients with big promotions and offers. Most of these services are waiting for clients to make deposits into their accounts. They make it extremely difficult to make withdrawals. Some brokers can charge hefty commissions to provide any services. And then there are others that can vanish without any trace.
Always Choose CFD Brokers
When it comes to speculating on cryptocurrency price, it is best to choose a Contract for Difference (CFD) broker. Whilst this means that you will not own the digital currency, it also gives you peace of mind that you will not be dealing with unlicensed and unregulated brokers.
What is CFD?
CFD is technically a financial instrument, allowing you to speculate on the currency’s price to generate profits. Its value is equal to the cryptocurrency’s price at the time of buying and the current price. CFD’s value is directly proportional to that of the digital currency.
There are many advantages of choosing a CFD broker, as stated here:
Regulated Financial Product
- CFD is itself a regulated financial instrument. This means that it is offered only by licensed cryptocurrency brokers. Thus, your funds are protected under the law and lie safe with a broker that is regulated by the authority.
- The funds are kept in a separate bank account. Even if the broker’s company is dissolved, your funds will be safe.
- Reputed CFD brokers offer risk management tools.
- This can help put a limitation on how much you can lose.
- Once you set a stop loss, you will not lose beyond the set amount.
Since the cryptocurrency market is highly volatile, choosing a CFD broker with risk management tools can protect your assets. Besides, you can expect such a regulated broker to maintain openness about their trading fees and commissions. When you choose an unregulated broker, you can never be certain whether they will follow the initial promise after you have deposited the funds.
Choose a Reputable Cryptocurrency CFD Broker
If you were to choose a broker located in another country, it may be required to wire the funds to them when making the purchase. If the broker isn’t licensed and regulated, it is likely that the bank may reject the wire transfer. So if you are looking for the right cryptocurrency broker, make sure to choose a licensed service. Besides, they should also meet your specific needs.
There are some regulated CFD brokers that can also serve advanced investors with easy-to-use systems such as stop-limit and limit orders. Some have limitations on beginner accounts. The ideal system will provide you a wide range of protection, including:
- Protection against money laundering
- Mobile apps for keeping track of price and trading
- Simple and quick ways for transfer of funds between ‘wallet’ and bank account
Free Demo Accounts
Many regulated cryptocurrency brokers also allow their clients to begin with free demo accounts. This is an excellent option for beginners to practice trading without placing their funds at risk. It can allow you to invest or trade the same way you can with a real account. You can test the trading platform and determine whether to choose their services or not.
So make sure to consider all these points when choosing the right cryptocurrency broker. It is in your best interest to select a CFD broker that is fully-licensed and regulated.