Contents
Why we reccomend eToro for buying Bitcoin Cash from Kenya?
Advantages:
- It is possible to make investments in tons of other products
- Leverage is allowed
- Really user-friendly and simple
- It takes strategies from experienced investors so you can replicate them
- You can go short
Official site: www.etoro.com/bitcoin-cash
You should certainly consider eToro if you are interested in acquiring Bitcoin Cash from Kenya.
eToro is well-known for making “social trading” fashionable. Social trading is an innovative form of investing in which investors can imitate the movements of other traders who have been generating income for a long time.
eToro has solutions for you, especially if you don't have much experience in trading. You can rest assured that you are doing a smart investment move when replicating those from subjects with a long profit record. On the contrary, if you are an expert in the subject willing to share your methods with others, eToro pays up for it.
Besides, the platform is so uncomplicated, great for a user who wants to begin in the Bitcoin Cash world, without getting crazy with tons of diagrams and numbers.
Are you familiar with the term “leverage”? We'll put it simply:
another good thing about trading is that it lets you invest even more than what you really have. That is, if you enter with $ 100 and you use x2 leverage, the amount of your investment will be $ 200.
Leverage and the importance of “Take Profit” and “Stop Loss”
Let's assume that you are sure that the price of Bitcoin Cash is going to raise its price, thus you want to “go long”.
You are positive that Bitcoin Cash will rise, but you can only invest $ 1,000. Isn't it a shame to miss out on the possibility of making more money?
Possibly, you could ask a financial company for a credit, wait for it to be accepted, wait for the money, and then acquire Bitcoin Cash… However, when you finish doing all that, probably Bitcoin Cash would be already at a much higher price, and it wouldn't be a good idea to invest then.
Leverage is like a loan, and you will only have to click a few times! eToro allows you to invest (and earn) much higher amounts than what you actually have on the platform's wallet. Before trading, you will be able to choose between the different leverage options as in the image below:
Within other markets, the ability to leverage is greater. This is because cryptocurrencies are usually medium-long term investments, and leverage is used primarily for short-term operations or day trading. Let's talk a bit more about how leverage works:
- If you want to invest $ 1,000 and you use leverage x2, you will be starting with $ 2,000 (remember that$ 1,000 are a “loan” from eToro).
- A few days later, Bitcoin Cash does rises, as you assumed, and now the price of your investment is $ 2,400 (20% higher), so you decide to sell back.
- The $ 1k of leverage will be deducted, and you will have $ 1,400 left; which means you've earned $ 400, since the other $1,000 was yours initially.
In conclusion, by investing $ 1000 and obtaining $ 400, your net profit would be 40%. That is pretty decent.
Does it sound too wonderful? The trick is that the risk of losing out also increases. If everything goes according to plan and the price goes up, you will make more money in less time; however, if the value of the asset goes down, you will also lose more in less time.
For instance: if instead of increasing by 20%, the price falls by 10%, you do not lose $ 10, but twice (the leverage) that figure, that would be $ 20. That is why to operate with leverage it is fundamental to know about Take Profit and Stop Loss.
Take Profit is used as a form of reducing risks when trading. When you enter, you can set a profit limit and ask that your position is automatically closed when the asset reaches a price.
If you purchased Bitcoin Cash at $ 100, you request eToro to close your operation when it reaches $ 120. That way, you make sure you won't be blinded by greed and decide to wait a bit longer in case it keeps rising, which could make you lose it all.
Stop Loss is even more necessary, especially if you use leverage, since a small loss with leverage can have a significant impact. Always remember to set a Stop Loss lower than that suggested by eToro.
What's the difference between CFDs and futures?
Here is a brief comparison between CFDs and Futures, in case you want to know more:
- Counterparty
- Futures: the exchange is made with someone else, another trader.
- CFDs: the counterparty is the broker (eToro). In other words: you do not “play” against or with another trader but the bank.
- Expiration date:
- Futures: they expire on a given date. When that date arrives, your position is closed even if you are in losses.
- CFDs: there is no expiration date. It is possible to wait until you rise up and then close.
- Options for trading:
- Futures: options are much more limited
- CFDs: they include lots of different assets, commodities and currencies
- Minimum deposit:
- Futures: you need a larger initial investment
- CFDs: you can get in with a lower trade size
- Cost of trading and commissions:
- Futures: being higher figures, rates are usually proportionally lower
- CFDs: higher (although they are not excessively high either)
- Leverage:
- Futures: you can't leverage
- CFDs: completely available
About Contracts for Difference
If you already have been on eToro, you probably noticed that the acronym CFD appears all the time. We will explain its meaning now, but you should know first that cryptocurrency operations on eToro are only CFDs when you go short or select leverage higher than x2 (nevertheless, the platform does not even allow this option).
For the record, and if you want to try at some point day trading cryptocurrency and other more advanced practices, later on you will also find concepts like leverage and “going short”.
With CFDs you can operate on the platform even if you are not “in the black” or having a negative balance. For instance, you believe that the Bitcoin Cash will fall, so the logical thing is to think “if it is going to depreciate (go down in price), I'll simply wait until it does and then I'll bet”. However, if it really falls, it might mean extra money for you.
You can do that by “going short”. Here's how it works:
- You ask for a loan of, let's say, 100 units of Bitcoin Cash, which total price at that moment is $ 5,000 (obviously, these figures aren't real)
- You make $ 5,000 by selling the 100 units
- The price is reduced, as you guessed, and the unit of Bitcoin Cash now costs $ 30 instead of $ 50
- You obtain the 100 units again, but at their current price, $ 3,000
- You give back the 100 units to the person that loaned them to you
- The difference is yours, so, you will have earned $ 2000
Consider that it seems much more complex than it is: we can summarize this whole operation by saying that by trading in Bitcoin Cash you can also earn money if you anticipate it will fall.
How to use eToro
We mentioned before that one of the best features of eToro is how simple it is to use the platform. You don't need to read a lot or have previous knowledge to start investing.
You won't have any issues with the interface if you have used any of the most common social networks, like Instagram or Facebook.
We will explain, roughly, the registration steps and the different sections that you will see on the page.
When you register, you will have to fill in your personal data, like first name, last name, address….
Before you end up with the sign-up process, you will also have to answer some questions about your previous trading activities.
But don't feel like you are taking an exam. They only intend to find out how much you know and which instruments to recommend for you.
Let's review the different tabs of the page.
In “Set Price Alerts” you can set alarms on the price of certain assets. You only need to click on the three points at the end of the line and you will be able to program a price alert. It is a very useful tool for when you are after a security which price is decreasing, but it seems to you that it has not finished falling yet.
In the “News Feed” tab is the most social part of eToro: where users are interacting all day and sharing opinions, tips, and other valuable information.
In “Discover” you will find the investment tabs: “Instruments”, “People” and “CopyPortfolios”. And we discussed previously in this guide the different financial instruments that are available on eToro:
- Cryptocurrencies
- Exchange-Traded Funds
- Stocks
- Raw materials
- Currencies
- Index funds
In “People” are all the profiles and historical performances of other users, and you can replicate their movements with just one click. This is where the “social trading” term is best applied.
In this section, you will be able to find those traders that you find more interesting. When you select an investor and indicate the amount you want to invest, eToro will automatically replicate their movements, proportionally. For example, if you have $ 1000 and the user puts 20% of their funds in an asset, the platform will also invest 20% of your money in the same asset, in this case, $ 200.
Lastly, you will also see the CopyPortfolios divided into three main kinds: “Top Trader”, “Market” and “Partner”.
The advantage of copying to CopyPortfolios instead of individual traders is that this way the risk is more diversified. There are all kinds of portfolios that you can recognize easily and are divided by sectors. Therefore, if you think a specific sector, such as fashion or healthcare, has good chances to succeed, you can look for that specific portfolio and invest in it.
Trading strategies
There are lots of ways to trade cryptocurrencies: from buying and holding to day trading (and benefit from price volatility).
In case you don't have much experience in investment, I suggest something in between: when you open your position, place a dynamic stop loss 15-20% under the top price, and let the magic happen.
Therefore, if for example you purchase a cryptocurrency at $ 10, it reaches $ 20, and after that it decreases to $ 12, your stop loss will close your position at $ 16-17 and you will have made a decent profit.
Perhaps you are wondering: why not selling when the cost is at its highest? But unless you are a psychic, that is just not possible. The mentioned strategy can work perfectly and is much more realistic.
At some point, you will be ready for more advanced investment strategies, like using leverage or going short.