Contents
Why we reccomend eToro for trading with Zcash from Australia?
Why do we recommend it?
- It is uncomplicated and easy to use
- You can replicate investment moves
- Admits short-trading
- You can trade leveraged
- It is possible to make investments in tons of other products
Official homepage: www.etoro.com/zcash
You should certainly consider eToro in case you are thinking about purchasing Zcash from Australia.
“Social trading”, a relatively new form of investing by replicating techniques and strategies from other experienced investors, has become popular because of eToro.
eToro has solutions for you, even if you don't have much experience in trading. You can rest assured that you are making a smart investment since the site emulates those from subjects with a long profit record. On the other hand, if you are an expert in the subject willing to share your abilities with others, eToro rewards you with money.
It is also very convenient how accessible is the platform, ideal for beginners who are taking their first steps with Zcash.
About Contracts for Difference
It is possible that you have found the acronym CFD more than once if you entered eToro before. We will come back to it, but you should know first that CFDs on eToro are only possible when you are short-selling.
We will also refer to terms such as leverage and “going short”, in case you are considering day trading cryptocurrency or other more advanced practices.
eToro allows you not only to bet “in the black”, but through CFDs you can also bet “in red”. Let's say that you have the conviction that the Zcash will go down, so probably you think that it is better to wait until it does and then go in. But if it really falls, it might mean extra money for you.
The operation known as “going short” will allow you to do that. It functions, more or less, like this:
- You ask for a loan of, let's say, 100 units of Zcash, which cost $ 5,000 at the moment (these figures are made up)
- Then, you sell them at their current price, $ 5,000
- The price is reduced, as you guessed, and the unit of Zcash goes from $ 50 to $ 30
- You get the 100 units again, but their total current value is now $ 3,000
- You pay back the 100 units to the loaner
- You keep the $ 2000 difference!
It is far more simple than it may seem. Just take into account that by trading in Zcash on eToro, with CFDs you can make a profit when you anticipate downs.
In case you still don't know what “leverage” is, we'll put it short: it is, simply, the ability to invest a higher amount than you actually have. For example, if you start with $ 100 and you leverage x2, your initial investment will be $ 200.
Why using leverage and how to do it
Assuming that, for example, you are certain that Zcash is going up, and that you have $ 1,000 for “going long”, you should know that you have the option of investing more and making more money.
You could consider asking for a credit, but you must know that all the process takes time, and when you receive the money, Zcash might be already so expensive (if your guess was right) that investing wouldn't be convenient anymore.
With leverage, you can get that amount of money with two clicks. It's exactly like a loan, but much easier and quicker, and with the benefit that you will be getting it directly from eToro. It is simple, before investing you will see the different options as in the image below:
Trading with other assets allows you to use more leverage. The reason is that leverage is most used for short-term operations, and cryptocurrencies tend to be a medium or long-term investment. That said, I'm going to explain better how leverage works.
If you have the $ 1,000 and choose leverage x2, your investment is 2 * $ 1,000, that is to say, $ 2,000. eToro would be “loaning” you the extra $ 1,000.
A week after that, turns out that Zcash goes up and now the value of your investment is 20% higher, which means, you have $ 2,400 in Zcash. But you don't want to be too greedy, so you decide, wisely, to sell back.
You need to pay back the $ 1,000. You have $ 1,400 left, of which $ 1000 was yours initially, so the net profit is $ 400.
In conclusion, by investing $ 1000 you can make a profit of 40% (in the case you earn $ 400). That is pretty decent.
But not everything is wonderful. If all goes as you intended and the price rises, you will make profits. However, if the price goes down, you will also lose more money than you invested.
For example: if instead of increasing by 20%, the price falls by 10%, you won't lose $ 10, but twice (the leverage) that figure, that would be $ 20. For that reason, the concepts of Take Profit and Stop Loss are fundamental when using leverage.
Take Profit is a trading limit you can set for your assets: you program your operation and ask the platform to sell them once they get to a point above the entry price. For instance, you can buy Zcash at $ 100 and request that your position is closed automatically when it goes up to $ 120. It is very helpful to avoid being blinded by enthusiasm: we would all take a 20% profit when investing, but when you reach that 20% it is easy to want higher profits and risk losing it all. It's like you made sure now of not acting recklessly in the near future.
Stop Loss is even more important, mostly if you trade with leverage, because a small loss with leverage can have a significant impact on your wallet. You always need to establish a Stop Loss lower than that suggested by the broker.
What is an ETF?
Have you heard about Exchange-traded funds? They are passively managed funds, known for combining the benefits of stocks and mutual funds, because they can be traded regularly at market price, but have much more investment possibilities and the fees are significantly lower.
Stocks
The most common financial instruments are stocks or shares: these are the parts in which a firm that chooses to go public is divided. You can own a proportion of a company and have returns, but first, you should know where to invest your money.
We can classify stocks into two different kinds: those that pay dividends and those that do not. Those that pay, at the end of the fiscal year, distribute profits among the stockholders; the latter, on the contrary, do not. But this is not to say that the latter have less to offer. If a company does not pay every year but has a lot of potential, you should not discard that option, since the capital gain you will get from the sale of the shares can be much greater than what you would earn through dividends.
If you invest in shares that pay out dividends, you will receive them into your account on eToro. Therefore, you can collect that money or you can choose to reinvest it. Nevertheless, you can take advantage of compound interest, so our suggestion is that you reinvest.
Consider that when investing in shares on eToro you can use leverage to “dope” your trades, but in that case, you will not receive dividends as it would be a contract for difference. For that reason, for long-term investments, it is better not to use leverage: not only because you lose dividends, but also because you will have to pay commissions as long as the operation is open, and these can end up with your gains.
About ETFs
Exchange-Traded Funds or ETFs are a kind of passively managed fund, similar to index funds. They can be described as a combination of stocks and mutual funds, including the best features of both. They can be traded like regular stocks, but include a wide diversity of assets and have lower fees.
Trading strategies
There are different methods or ways for crypto trading, like buying and holding or day trading (and using price fluctuation in your favor), for naming just a couple.
My suggestion for those who are beginning to trade is something in the middle: when you open your position, place a dynamic stop loss 15-20% below the maximum price, and let the rest happen on its own.
For instance, if you purchase a cryptocurrency at $ 15, then it rises up to $ 25 and decreases back to $17, the stop-loss will allow your operation to be closed, maybe at $ 21 or $ 22. Hence, you will obtain a fine profit.
I know it might sound more appealing to sell when the cost is at its maximum, but unless you're a fortuneteller, that's impossible. The mentioned strategy is much more down-to-earth and it can give great results.
Later on, you will be able to apply more complex techniques, like using leverage or going short to make money from bear markets.
Demo account: How does it work?
Are you beginning in trading? Using a demo account can be useful. You just need to set the virtual mode and you can start practicing with an “imaginary” amount.
A virtual portfolio can help you to practice and gain experience before starting to operate with real money. When you open your demo account, you will begin with a virtual amount of $ 100.000, to operate with a variety of financial instruments available on eToro (not just with Zcash).
If your trials don't go well and your balance ends at zero, there is always a possibility to replenish your virtual funds. You'll probably do better on the second try.
However, keep in mind that you need to be prudent for trading, and using a practice account can have the opposite effect. It is not the same to risk your own money than to trade with virtual funds that you don't mind losing.
And of course, the demo mode is kind of pointless if you want to trade in the medium or long-term (which almost assures you a profit only by replicating an index), since you would be wasting years. Demo accounts may be ideal for trying out before trading in the short or medium-term.
eToro Interface
We mentioned before that eToro is very friendly and intuitive. Anyone can start using it without previous knowledge or long explanations.
If you are familiar with any of the most popular social networks today, like Twitter or Linkedin, you can perfectly use this platform.
We will talk about how to register and the different tabs you will find on the platform.
First, you will have to fill in your personal data, like first name, last name or address.
During the sign-up process, you will also have to answer some questions about your previous experience as an investor.
But don't feel intimidated. They only intend to find out about your previous experience and knowledge to determine which instruments to recommend for you.
Let's get to know the different sections of the page.
“Set Price Alerts” allows you to set alerts on the price of certain securities. It is a very useful tool for when you want to purchase an asset which price is decreasing, but it seems to you that it has not finished falling yet.
In “News Feed”, investors interact and share valuable information.
“Instruments”, “People” and “CopyPortfolios” are within “Discover”. As we discussed in this guide, the six types of instruments on eToro are:
- Cryptocurrencies
- ETFs
- Stocks
- Commodities
- Currencies
- Index funds
In the tab “People”, you can find the profiles of eToro users and their performances. This is where you can duplicate the movements of the traders that you find most inspiring.
You can search for those investors that best suit your interests: by risk level, types of instruments, average earnings… Just indicate the amount of your investment and eToro itself will be in charge of replicating the movements made by the selected investor, in proportion. This means that if you put $ 1000 and the investor puts 10% of their capital in Amazon, eToro will invest $ 100 of your balance in the same company.
Finally, you will see the popular CopyPortfolios. There are three types: Top Trader, Market, and Partner.
Sometimes you might prefer copying to CopyPortfolios than to particular traders, because you avoid putting all your eggs in one basket. The portfolios are identified so you can recognize them easily: one about gaming, another about large drone companies, another about pharmacy … You think that a certain sector will prosper anytime soon? Then look, because surely there is a CopyPortfolio about it.