Ethereum CFD Trading: How to Trade Ethereum CFDs
How much do you know about Ethereum trading, specifically, Ethereum CFD trading?
Cryptocurrencies are on the rise. Ether (ETH) is one of the most popular offerings and is known as the 'original alt coin'.
As of 2023, cryptocurrencies are slowly becoming more mainstream and finding their place in the world of finance. Ethereum, given its popularity and ranking, remains a hot topic amongst the crypto community as the technology progresses.
How to trade Ethereum CFDs? We cover this topic along with other details around Ethereum, Ethereum trading at Admiral Markets and more.
Table of Contents
Ethereum CFD Trading: How Volatile is Ethereum?
First of all, we need to know that cryptocurrency markets are much more illiquid than equity markets, meaning that larger market players can cause larger movements.
'Smart' money usually buys lower and places sell orders when the price is peaking. Thus, traders should avoid buying high. Ethereum is subject to a much wider range of price fluctuations relative to the currency (Forex) market.
Generally speaking, investors have been pouring capital into the market, betting that consumer demand will propel future growth.
At this point, all the cryptocurrencies, including the ETH vs USD CFD, are subject to significant speculation, and backed by very little historical data, which makes this asset class very volatile.
If you want to trade Ether CFDs and other cryptos, you need to get acclimated to volatility. For that reason, you might want to download the demo platform first.
You should also familiarise yourself with volatility protection settings, which can help you to minimise the volatility risk when trading.
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How to Trade Ethereum CFDs with MetaTrader 4 and 5
It's now possible to trade cryptocurrency CFDs with Admiral Markets via contracts of differences, including the ETH/USD CFD. Traders can access the ETH/USD CFD and other crypto pairs using MT4, MT5, and the MTSE plugin.
The process is simple and as follows:
- Download/open the MetaTrader platform
- Register a new account or log in;
- Open up the cryptocurrency chart (ETH/USD)
Also, all of the additional add-ons for the MetaTrader Supreme Edition are now also available for the latest version of MetaTrader 5 Supreme Edition.
Current vs Historical Price: Trending or Ranging?
Source: Admiral Markets, MetaTrader 4, ETH/USD daily chart (from July 2018 to March 2019). Accessed: 12 March 2019. Please Note: Past performance does not indicate future results, nor is it a reliable indicator of future performance.
The chart above shows the performance of Ether over an eight-month stretch between the summer of 2018 through to spring 2019. The thick red line is a 150-day simple moving average, an indicator that smooths out price fluctuations in order to make it easier to discern the overall trend.
You can see that there has been a clear downward direction to the price action over this period and the moving average has a negative gradient. Furthermore, the price of Ether has been depressed below this long-term moving average for nearly the whole time shown in the chart. Such an occurrence is often considered by traders to be bearish in nature.
Notice that there is a brief spike above the moving average in late February 2019, but this has not resulted in any reversal in the trend. There are, however, signs of stabilisation if we focus on the price performance since late 2018, which you should be able to see in the four-hour chart below:
Source: Admiral Markets, MetaTrader 4, ETH/USD H4 chart (from November 2018 to March 2019). Accessed: 12 March 2019. Please Note: Past performance does not indicate future results, nor is it a reliable indicator of future performance.
Over this time-frame, the Ether market has demonstrated range-bound characteristics. On 19 November 2018, the price sunk below 160.00, a price level that is marked on the chart with a blue dotted line. With the exception of the brief spike up in February, the price of Ether has remained depressed below that level since then through to the time of writing. Notice how the price pushed up in late December and early January but failed to break above this resistance level.
Support levels are also marked on the chart with blue dotted lines. One support level is at 100.00. The price rebounded a couple of times in November close to this level. It did then sink below this level for the first half of December, falling to the second support level at 80.55. Since then, though, price has remained bounded above 100.00.
With the help of the award-winning MetaTrader Supreme Edition plugin (MTSE) for MetaTrader 4 (MT4) and MetaTrader 5 (MT5), traders can trade with the ETH/USD CFD volatility - Click the banner below to download the MetaTrader 5 platform for free with Admiral Markets:
Ethereum CFD Trading: Potential Strategies
Technical trading and proven tools should be applied when trading Ether, which in turn could be the basis for trading the Ether vs Dollar CFD profitably.
Due to its volatility, scalping strategies could be applied if trading intraday. Those who wish to swing-trade ETH/USD need to be prepared for a bit of unstable price action, where steady profits might turn into losses within a split second.
A "flash crash" occurred on June 21 2017, when the price dropped from around $320 to 10 cents. It recovered thereafter, but investors and traders definitely took a hit in that period.
Mr Adam White, Vice President of GDAX, explained that an investor placed a multi-million dollar Ether "sell" order at 12:30 p.m. on a Wednesday. The order size caused the currency price (which was already volatile), to dip.
As we know, as the price grabs stop loss orders it creates additional momentum, and potentially huge movement in minutes or even seconds. Every close of a buy position is an automatic sell into the market and vice versa.
How to Day-Trade Ether
Open your ETH/USD chart. This is how you add indicators to the MetaTrader 4 platform:
Source: MetaTrader 4 - ETH/USD chart - How to add indicators to an MT4 chart - Platform Time: Julne 19, 12:15PM
Now, we will use a scalping strategy that combines the following indicators:
- Admiral Pivot (only available to MetaTrader Supreme Edition users)
- EMA (4, close)
- Bollinger Bands® (14)
- Awesome indicator
- Momentum indicator (14)
Source: MetaTrader 4 - ETH/USD chart - Data Range: 16 July, 2022 - 19 July, 2022 - Platform Time: July 19, 11:55AM
Enter a long position once the fast black 4 EMA (Exponential Moving Average) has crossed up through the middle Bollinger Band (14 EMA (red)). At the same time, the 'Chaos' and 'Momentum' should be crossing their zero lines, going up. Potential entry zones are shown as red arrows.
Source: MetaTrader 4 - ETH/USD Chart - Data Range: 16 July, 2017 - 18 July, 2017
Exit position or TP: Your exit position is executed when the 'Chaos Awesome Oscillator' changes its colour (mostly for high-frequency scalping purposes) or at the Admiral Pivot point. A stop-loss is placed below the recent swing-low.
Trading the Ethereum CFD
Proper money management is the holy grail of trading and, if applied correctly in a strong trending environment, it should theoretically make an enormous return of investment (ROI). Due to huge volatility, losses might occur as well, so it is extremely important to use proper money management. Market stability could be reached when the power shifts from investors seeking to profit from price fluctuations, to consumers actually using cryptocurrencies.
When that happens, volatility should stabilise. Traders should treat crypto trading the same way they would treat any investment in the early start-up stage. Also, intraday traders should definitely be focused on major trading sessions, as major trading centres provide the highest volatility in ETH/USD. Fortunately enough, the MetaTrader 4 (MT4) platform offers the instrument during major market sessions – 24/5.
Market Sentiment – Impact on the Hype in the Media
Back in 2017, Ether was very hot. The diagram below shows just how positive the sentiment towards Ether was back then.
Source: Bitcoin Cash - Q1 2017 Coindesk
Naturally, some of that sentiment has cooled off alongside the decline in the value of the ETH/USD CFD crypto pair since the heady highs of 2017. It is a general truism, however, that sentiment will decline for any previously-frothy market that has suffered a severe correction in value.
The question with cryptocurrencies and Ether still remains, however, which way will they go? There remain investors that believe that crypto prices will recover. One factor in Ether's favour is the potential of the Ethereum platform and in 2019 we have begun to see signs of institutional adoption of the technology.
Banking giant JP Morgan made headlines in early 2019 when it rolled out its JPM coin, which was touted as the first cryptocurrency backed by a US bank. While many news outlets acknowledged that this new digital token utilises blockchain technology, what many failed to mention was that JPM's proprietary Qurom blackchain is actually an enterprise-level version of Ethereum. Where this will all actually lead to is far from clear, of course, but this kind of concrete example of a real-world use of Ethereum's technology could serve to rekindle confidence in Ether.
That said, we should stress that the vast majority of cryptocurrency trading, including that of Ether, is pure speculation, and the current utility value to users is close to zero. Not many people use blockchain protocols, as opposed to many people who trade cryptocurrencies. We might also see regulations coming in terms of exchanging, issuing, and holding new coins.
Trading ETH and Other Cryptocurrency CFDs
In addition to trading CFDs in ETH/USD, Admiral Markets also offers the ability to trade CFDs with ETH/EUR and ETH/BTC.
To trade these pairs, traders simply need to download the software platform (MetaTrader 4 or MetaTrader 5), which grants access to the market and/or the ability to monitor price action on a chart.
If you'd like to get started, click the banner below to open a live account and start trading cryptocurrency CFDs today:
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