Buy Ethereum – Beginners Guide
Well, we assume that by now you know what is Ethereum and are only interested in ins and outs of Ethereum trading. If not, and you’d like to learn more, then just follow this link – What is Ethereum.
There are a few methods how you can invest, store, sell and buy Ethereum:
- Through CFD Brokers
- By opening a Cryptocurrency Wallet
- Trading on Cryptocurrency Exchanges.
Let’s have a closer look at these options, as well as advantages and disadvantages of buying Ethereum on these platforms.
What is CFD Broker and how you can buy Ethereum using their platforms?
- Largest Social Trading Platform
- Engaging Interface
- Great for Novice Investors
A Contract for Difference (CFD) is a popular form of derivative trading. CFD trading enables you to speculate on the rising or falling prices of fast-moving global financial markets (or instruments) such as indices, shares, commodities, cryptocurrencies, and currencies.
CFDs are a flexible way to trade on a wide range of global markets. Essentially, CFD trade is an agreement between two parties – seller and buyer, to exchange the difference between opening price and the closing price of a contract. Which means that you still can benefit from movements in the price without having to buy the physical product.
CFD trading is suitable for speculating on short-term changes in the value of an asset. You can open and close a position in a matter of hours or even minutes, so you can make gains from even short-term market changes.
Why we need CFD contracts and who would use them?
CFD contracts are used widely by institutional investors to hedge their positions against undesirable upward or downward swings in market values. However, they’re also popular with private individuals and professional traders looking for a simple way to access global markets without the large initial investment required with traditional investing.
CFD Trading – Go Long or Short when you buy Ethereum
If you think the market will be going up – then you place a buy trade or “go long”. If you think the market will be going down – then you place a sell trade or “go short”. The difference between the buy price and a sell price is known as a spread. If the market moves in the direction you predicted – you make a profit. If the market moves in the opposite direction – then you make a loss.
When you place a trade, you do not have to place a full value of your position, just a deposit, which is known as your margin.
Margins and Leverage
By investing directly in an asset such as a company share, or crypto-currency ethereum in our case, allows you to enjoy the full benefit of any rise in the asset value. It’s the same with CFDs but you don’t have to make a large investment to access this potential benefit. Using CFD brokers and trading platforms you can make the same profit as a cryptocurrency/asset owner with much lower capital investment, compared with buying the actual asset or in our case – when you buy Ethereum.
This can be achieved by taking an advantage of the margin, which CFD Broker offers to the trader. Margin is a loan or credit extended by your broker, that allows you to leverage the funds in your account to enter larger trades. Leverage is expressed as a ratio, for example, 2:1 leverage means that you would be able to hold a position that is twice the value of your trading account.
Advantages of Trading with CFDs:
- 24-hour Forex and cryptocurrency trading
- Trade when prices are rising or falling
- No stamp duty
- Manage your risk easily
- Trade using margin
- Low Fees and No hidden charges
- Access global markets
- Regulated by our local financial services authority
Disadvantages of Trading with CFDs:
The biggest disadvantage in trading with CFDs is when the market moves against your predictions. Yes, that does happen, while in the traditional trading you would lose only the invested money, with CFDs you can lose much more than your initial investment was. The loss will be determined by the leverage or margin you have chosen. For this reason, it is recommended not to exceed the amount of full trade together with the leverage above the figure which you can afford to lose and always implement stop losses at the reasonable levels when you buy Ethereum CFDs.
What are Cryptocurrency Wallets?
While trading with CFDs seems like a very desirable investment proposition short-term, what if you think that Ethereum is the cryptocurrency you want to invest in a long-term and want to hold it for a longer period of time to benefit from a long-term growth potential. Well, in this case, we would recommend getting a cryptocurrency wallet.
A cryptocurrency wallet is a software program that stores private and public keys and interacts with various blockchains to enable users to monitor their balance, send and receive digital currency. Worth to mention, though, that cryptocurrency itself (or Ethereum) is not actually “stored” in a wallet. Instead, a private key (secure digital code known only to you and your wallet) is stored that shows ownership of a public key (a public digital code connected to a certain amount of currency). So your wallet stores your private and public keys, allows you to send and receive coins, and also acts as a personal ledger of transactions.
What is the main difference between CFDs and cryptocurrency wallets?
As we determined above with CFDs you do not own the currency and as the name suggest you only own a contract for difference in the price fluctuation. With wallets, you do actually own the cryptocurrency and can use your wallet for a long-term storage of the currency or daily purchase in the places where the cryptocurrency, or Ethereum, is accepted.
Different types of Ethereum Wallets
There are a few different types of cryptocurrency wallets which come with different levels of security depending on the purpose of the storage.
The Desktop Wallets
Desktop wallets are downloaded and installed on your PC or laptop. They are only accessible from the single computer in which they are downloaded and can be used only on your desktop. A downside of this wallet is the high risk of the potential virus attacks from the Internet and a chance to lose all your wallet data with that.
Online or Cloud Wallet
Wallet runs on a cloud and is accessible from any computing device in any location. Online wallets store your keys online. Security issues are obviously are the main concern here as with the cloud-based application there is a higher risk of the account being hacked.
Can be downloaded to your mobile from app store or google store. Can be very useful as can be used anywhere anytime including the purchases at the retail points. Usually much smaller and a lot simpler than the desktop, but also have a higher risk of the keys being lost or stolen. Recommended for a smaller amount of the coin storage.
A different form of software wallets, which store the user’s private keys on a hard drive, device like USB. Hardware storages can also make online transactions but stored offline what delivers an increased security. If you need to store large amounts of Etehreum we would suggest using Ethereum hardware wallet. You can buy hardware wallets online what would cost you anywhere between £50-£100.
The easiest to use and the term simply refers to a physical copy or a print out of your public and private keys. Basically, write down your keys and put it in a secure location where no one will find it. Downside if you forget where you put it or it catches fire you lost all your data unless you have it stored in multiple places.
How to trade – sell an buy Ethereum on Exchanges?
Cryptocurrency exchanges are websites, where you can sell or buy Ethereum or exchange any other cryptocurrencies with the full ownership of the cryptocoins. For those that want to trade professionally and have access to fancy trading tools, you will need to use an exchange that requires you to verify your ID and open an account. There are now hundreds of platforms where you can do that, below are just a few:
Buy Ethereum Online – recommended first step
If you are just starting to trade cryptocurrencies, and Ethereum in particular, we recommend to start with the CFD broker. The main advantage is that most of the well-established brokers will allow you to open a demo trading account where you can start to learn to trade without real money. Once you get comfortable investing with virtual currency and learn how to trade, you can start investing real money at a level that you are comfortable with. The more experience you get, the easier it will be for you to trade and you can move into Cryptocurrency Wallets or Exchanges if you want to.