Broker to Trading

Cryptocurrencies, which are the value tokens of networks using a distributed electronic ledger to keep track of payments, are traded on exchanges. Exchange trading of cryptos happens for a range of reasons, from speculation to providing liquidity. However it is possible to trade cryptocurrencies without having to trade on an exchange. This can happen at CFD brokers.

CFDs are Contracts For Difference. They base their value on the price of cryptocurrencies as traded on exchanges. Because the trader is trading a contract based on the price of a cryptocurrency, they do not own any cryptocurrency when trading it. They can go long or short and can use leverage, though leverage tends to be restricted for cryptocurrencies, as they are extremely volatile (increasing leverage increases risk and exposure to volatile price movements).

A cryptocurrency is a digital currency which uses cryptography to secure itself, to help ensure that payments can be safely processed from source to destination. Cryptocurrencies typically 'outsource' payment processing, it is part of their Internet friendly design. They are typically part of the Internet ecosystem and they make use of it. So they can let anybody plug into their network and process payments. This does not have to be done by miners, who compete to process payments in return for a reward, but it usually is.

The network itself typically validates blocks of processed payments allowing them to be added to previous blocks of processed payments, securely attached with cryptography. This data structure is called the blockchain and it creates a distributed electronic ledger. Some cryptocurrencies use different data structures for their distributed ledger, rather than a blockchain.

One possible advantage of using a crypto CFD broker, is that the trader can trade cryptos on the online trading platforms used to trade other markets. They can use the same services as are available for other markets. Thus at ECN CFD brokers which offers cryptocurrency CFD trading (such as the brokers in the table), ECN trading platforms can be used and other services such as no dealing desk intervention and high speed order processing. This means the trader can use automated trading in ECN trading conditions.

ECN brokers typically use some way of being physically close to liquidity providers, as they are matching traders with liquidity via the broker (though they may also fill orders from their own pool of traders). Some co-locate their trading servers at data centers which contain the servers of liquidity providers and other participants. These centers can use optical fibre cables to allow for high speed order transmission. This can reduce the latency or delay in orders to a matter of milliseconds. This kind of high speed order fulfillment can be important for some strategies, particularly those which use automated trading. However all traders can take advantage of high speed order processing. Because there is typically no intervention from a dealing desk in the order, then the trader can use a wide range of styles. So trader can use algorithmic trading to trade cryptocurrencies if they wish.

The trader can also make use of ECN trading conditions to trade at their own discretion and all the ECN trading platforms can be used this way. Some of the platforms have additional tools, such as a wide range of technical indicators. Other platforms (for example MT4 and MT5), while they may not have a particularly large number of indicators inbuilt on the platform, allow the trader to download more and even modify and build them.