CFD vs Cryptocurrency vs Stockbrokers

What is CFD? Contracts for Differences is a form of betting stakes on outcomes of market prices. It

CFD - Contracts for Differences

Contracts for Differences is a form of betting stakes on outcomes of market prices. It is very similar to 'spread-betting' and is a highly speculative activity. What that means is that the possibilities for losing or gaining a huge amount of money from a small stake are very dangerous and addictive. Spread-betting is the act of betting on a currency or price to go up or down. If I wanted to be $100USD per point of the US dollar against the AUS dollar and the AUS dollar went up 3 cents then I would lose $30,000 because there are 100 points in a cent and 100 dollars a point. Now if I only had $5000 in my account I would then owe a further $25000 and I could be liable to pay this to keep my position 'open.' Now because of these factors, the bookmakers that deal in CFD have made trading software that allows for various restrictions to be placed on the amounts bet by different variables such as market price, number of points jumped, time, trading volume etc. This is what has come to be known as the act of 'spread betting.' Making up models on MT4 or MT5 software that will allow for you to make a profit or loss depending on what happens to prices and the markets.

This is not trading as you never own any stock, they just associate themselves with trading as the really canny professionals can turn a daily profit and do well.

On the other side, 80% of all retail accounts lose money and there are many offshore unregulated brokers who may never pay up when they should and will deliberately give bad advice in order to get your money. This is betting not trading, they get the money when you lose like any other bookmaker.

Bitcoin and Cryptocurrency

Cryptocurrency is a self-regulating commodity that is yet to be widely accepted as a currency. Crypto currency has to be 'mined' like gold using computing (processing) power and as such it has a price based upon supply and demand relative to local central bank currency. As the currency is hard to mine the number of coins is unlikely to suddenly increase as the mining is much like the gold standard theory. That only about 2% of the market increases each year and so the currency is fairly stable once it is widely accepted. The current volatility is very much based on market confidence as you cannot use Bitcoin to buy a coffee yet, so people get nervous when the price starts to fall and jump out hoping to come back in later on with a better price.

Stocks and Stockbrokers

Owning stock in gold mines or computing companies or oil drilling companies is very different to the above ideas. You own something that has a physical representation and gives you an income if you hold enough stock. If you wanted to buy Amazon or Apple or Microsoft stock, then you own a part of that company and can be rewarded with dividends when that company does well. This means that even if your stock goes down in value you will still receive benefits without spending stock, and if you have invested wisely, the stock will eventually rise back up and you will hold stock in a valuable company.

Each has its advantages. If you know what you are doing and are a seasoned CFD trader then that can be a living, but in the most part it is a highly dangerous betting game.

Cryptocurrency is great if you got in early, and it may be useful through the great reset. It is also vulnerable to collapse and increasing prices in electricity and computing.

Stocks in the right company are a great choice for normal people. If there is a company that your are a big fan of the products of then investing with them can be exciting and rewarding.


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