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What is Litecoin CFDs?

WHAT IS LITECOIN CFDs?

While Bitcoin is the Gold of cryptocurrency, Litecoin is the Silver of cryptocurrency. It is the offspring of Bitcoin, and like its parent, it uses the blockchain technology (a blockchain is a distributed ledger). Unlike Bitcoin, Litecoin announces pair to pair payments that are instant and very low cost. In terms of market capitalization, it is the fifth-biggest cryptocurrency. It was invented in 2011 by ex-Google software Engineer Charlie Lee.

Like Bitcoin, Litecoin is an open-source without a central authority. Independent individuals and companies mine the currency using complex mathematical algorithms, and miners get paid for their work in Litecoin. The Litecoin cryptocurrency stands on a different protocol compared to Bitcoin; this reduces block confirmation time from ten minutes to 2.5 minutes and allows a higher volume of transactions to be achieved with transaction fees minimal compared to Bitcoin. 

Litecoin CFDs are a type of derivatives, a contract between you and the broker. CFDs derive their values from an underlying asset. They present a convenient way to trade Litecoin without you having to buy the cryptocurrency itself. They also give you the leverage of paying a certain percentage called the margin of the cost and borrow the remainder of the capital from your broker. Then you can leverage the money to magnify your small cash investment into a much larger market position. Investors use leverage to try to get more meaningful returns. CFDs enable you to gain, even when the price of Litecoin falls. However, if you miscalculate and the price doesn’t change the way you expected it to, you may suffer losses. 

The Contract for difference is a flexible alternative to other forms of trading CFDs allow you to trade whether you think that the price of a financial market will go up or down. You can use a CFDs account to trade a wide range of markets, including shares, currencies, stock indices, commodities, etc. 

How to calculate the Litecoin CFDs margin

Margin is the deposit required to fund a trade expressed as a percentage of the notional value. For example, if you are trading on $20,000 of Litecoin via a CFDs and the CFDs provider sets a margin of 10%, you would need a margin or collateral of $2,000 in your account.

To calculate your initial margin: quantity × price = Full Notional value.

Margin required = Full Notional value × Margin percentage.

So, if, for example, you want to trade an asset of 1000 and its $10 each, Full Notional value will be 1000 × $10 = $10,000. If the margin percentage is 5%, then the initial margin required will be 5% × $10,000 = $500

Usually, traders are allowed to use more capital than the initial amount deposited due to leverage, and the broker needs a margin, which is the collateral to ensure that all losses are covered. 

Litecoin CFDs trading 

Litecoin is very volatile, so there are plenty of opportunities for investors in terms of price movement. CFDs (Contract for difference), unlike buying a share, you do not own the asset, on the share purchase, the asset changes hands. CFDs are different; it is a contract with a difference in price, such that when you buy a CFDs, you agree to pay your broker the difference between the buy price and sell price. If the selling price is lower, you lose money, and you agree to pay that and vice versa. If the price goes up, the broker will pay you the difference. 

It is also important to remember the risk of leverage, as your deposit is only a small part of the overall exposure. There are possibilities of losing substantially more than your deposit if the trade goes against your speculation. However, it is possible to reduce your potential loss by using a stop order. This means that a trade will automatically be closed if it goes against your speculation by an amount you have specified.

Before considering any Litecoin CFDs trading, the traders must consider the trading strategy, trading psychology, and risk management. Having a trading strategy will equip the trader with how-to and when to approach the financial market. It provides the necessary tools with which to predict the price movement profitably.

Trading psychology is another aspect that shouldn’t you shouldn’t neglect as a trader. Because when you risk money, there comes some level of anxiety and a cascade of emotions, right trading psychology will adequately position the trader to handle losses effectively.

Litecoin contract for difference.

A significant advantage of the Contract for difference is the margin. The margin is the leverage that allows you to put a small portion of the asset’s notional value.  If you are trading on margin for an example, if the margin requirement for that share is 10%, you have to put only 10% of the total value, and your broker will provide the remainder.

There is no stamp duty to pay on CFDs, unlike shares where you will have to pay stamp duty. You only pay a commission. You can also go long and short. You can speculate the movement up in price and even speculate the movement down in price.

A piece of proper knowledge and application of risk management is also vital before approaching the Litecoin CFDs trading. This will prevent over risking and losing a large sum of money. It is generally a suitable practice to employ the use of technical analysis when day trading with Litecoin, tools such as candles, price action indicators, and other technical indicators will be quite handy when trading Litecoin CFDs.

Conclusion 

Litecoin adopts the scrypt algorithm. And with this, the processing speed of the block has significantly increased than that of bitcoin. Trading Litecoin CFDs on margin in both long-term and short-term investments that do not require due to excess attention, making it easy to predict. Still, there is the need to monitor the news around it, as this can significantly affect price movement. As with any other trading, long-term, and consistent profitability is a product of good investment on the trading skills of the investor.

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