IG Index Bitcoin trading explained by Fxstay.com, All about IG markets Bitcoin trading, Read how to trade IG group Bitcoin cryptocurrency, for more info about IG Bitcoin trading check out the IG index review by ForexSQ.com forex trading website.
IG Index Bitcoin Trading
IG offers bitcoin derivatives trading, in the form of spread betting, CFD trading and digital 100s. All of IG’s products offer ways to trade bitcoin with enhanced security and flexibility, but they operate in different ways and appeal to different traders.
IG Bitcoin spread betting
Spread betting enables you to bet on whether bitcoin will move up or down. The greater the price movement that bitcoin makes, the greater the profit (or loss) when the spread bet is closed.
IG Bitcoin Trading Benefits
Just like when spread betting on other assets, traders who bet on bitcoin never actually own any crypto-currency. As such, many of the potential difficulties and risks associated with bitcoin are negated when spread betting:
There is no need for a bitcoin wallet to be obtained
Spread bettors do not need to trade via an exchange, which means that the security problems associated with exchanges are not a factor
In the UK, that also means that the tax implications associated with trading bitcoin do not come into play; spread betting is classed as gambling, and as such does not incur a tax on profits
If a trader believes that bitcoin is about to lose value, they can short the crypto-currency by ‘selling’; most bitcoin exchanges do not allow you to short but spread betting allows you the chance to make a profit (or loss, if bitcoin moves upwards) in a bear market
However, spread betting bitcoin also comes with significant risks, and losses can exceed deposits on trades. For more information on risk management, see bitcoin derivative risks.
IG Bitcoin CFD trading
Like spread betting, CFD trading offers an opportunity for you to speculate on bitcoin’s price fluctuations without any actual crypto-currency trading hands. It has many similarities to other bitcoin derivatives, but also some key differences that you need to be aware of.
When a bitcoin CFD (or contract for difference) is traded, an agreement is made to exchange the difference in value of bitcoin from the time when the contract begins and the time when it is closed. As with any CFD trade, the underlying asset – in this case bitcoin itself – is not traded, but dictates how much is gained (or lost) from the trade when it is closed.
While a CFD does stipulate that the difference in value of bitcoin from when the contract is opened to when it is closed must be paid, it does not usually expire naturally. Instead, if you wish to close your bitcoin CFD, simply place a trade of the same value in the opposite direction.
IG Bitcoin Trading Benefits
Bitcoin CFDs have many of the same advantages as bitcoin spread bets.
Traders dealing in CFDs do not need to open an account with a bitcoin exchange, or obtain a bitcoin wallet; the difficulties and risks associated with both services are thus negated
CFD trades can be opened as either long, indicating that the trader believes bitcoin will increase in price, or short if the trader believes that bitcoin’s value will fall
IG Group Bitcoin spread bets and CFDs – the risks
Bitcoin CFD trading losses can run indefinitely. Most CFDs and spread bets are also leveraged and bought on margin, which means that you are exposed to the full value of the contract for a fraction of its total cost.
Bitcoin is much more volatile than traditional ‘fiat’ currencies, thanks in large part to the relative scarcity of bitcoin and lack of a central bank’s guiding hand. A leveraged position on a currency that has been known to drop over $200 overnight – as it did back in December 2013 – can be a very risky proposition indeed.
Traders therefore need to ensure that risk management is set up on every trade. IG offers a number of ways to manage your risk. ‘Guaranteed stops’ (an optional feature that comes at a price) can cap your maximum risk if bitcoin’s value suddenly drops (or leaps) against an open position. Price alerts warn traders when a target is breached. Seminars and guides offer a comprehensive view of how to trade with as little risk as possible.
IG Markets Bitcoin Trading Conclusion
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