Litecoin belongs to the cryptocurrency category that has now circulated the net for several years. It has remained in obscurity in comparison to Bitcoin and later to others currencies such as the Ethereum and Ripple. In this article, we will provide an overview of Litecoin and will focus mostly on the aspect that interests us the most, namely the ability to trade with Litecoin online.
What is Litecoin?
Before trading with Litecoin, it is good to have at least an idea of what you are going to trade with and this reasoning applies to all types of financial instruments.
Litecoin is a peer-to-peer cryptocurrency that bears the name of the software project on which it is based (Litecoin) and like other important software projects related to cryptocurrencies, it is an open source software project so all technicians who wish to contribute to the cause can take part in it. This factor is important because it actually makes using it a lot safer.
The minting and transaction of Litecoin, therefore, take place through an open-source protocol and, for purposes of brevity, is not controlled by any central authority (as is the case for traditional currencies where it is controlled by the Central Bank and printed by the respective Mint).
Litecoin was born with the idea of improving Bitcoin. However, some major media agencies such as The Economist, New York Times, CNBC and the Wall Street Journal began to promote Litecoin as an alternative to Bitcoin among others. This initiative allowed the Litecoin to be introduced (and perhaps some of these agencies also profited from this a bit), but in the long run, this did not happen as the Litecoin was overtaken by other cryptocurrencies such as Ethereum and Ripple.
Litecoin’s mode of operation is very similar to that of the Bitcoin. Payments are made for addresses on digital signatures and these addresses are codes or rather strings of 33 alphanumeric characters. Transactions with Litecoin is recorded in Litecoin’s blockchain platform by adding blocks or codes that block the transaction and ensure adequate security.
As we have said earlier, the cryptocurrency bears the same name as Litecoin in the Litecoin system. In order to take advantage of Litecoin’s economic advantages, we can now consider trading with Litecoin through online CFD trading platforms.
We offer you brief but quite comprehensive information about these tools below, which will be enough for you to start trading with Litecoin. However, if you would like to learn more, you can consult our complete CFD guide.
Let’s get started.
CFDs are financial instruments that replicate the performance of another financial instrument, called an asset or more commonly, an underlying asset. In the case of Litecoin CFDs, therefore, the CFD replicates the performance of Litecoin prices.
Please note that with Litecoin CFD trading, you do not buy Litecoins but rather, you trade cryptocurrency traded securities that replicate its performance (quote). If you open a trading position with Litecoin CFDs, you will not own any Litecoin. In addition, trading with Litecoin CFDs is intended as a short-term transaction, unlike a traditional investment.
But what does it mean to open a position?
With CFDs, you can open upward (buy or long) or downward (sell or short) positions based on your prediction of the asset price quotation, which in this case, is your Litecoin price forecast.
- Opening a buying position means to aim for positive economic results proportional to the size of the rise that intervenes or should intervene between the opening of the buying position and its closure.
- Opening a selling position means to aim for positive economic results proportional to the amount of the fall that intervenes or should intervene between the opening of the selling position and its closure.
If you think in the next few hours or days the value of the Litecoin will rise in value, you may open a buying position. If this prediction turns out to be correct, you will get a profit proportional to the difference between the current price and the value at the time of opening the position.
Otherwise, if the forecast turned out to be wrong, your position would go into a loss and you would start to lose in proportion to the fall recorded. As we will see in the next paragraph, loss-making positions can be closed in a manual or automatic manner.
How to trade with Litecoin on Plus500
The first method that we will introduce for trading with Litecoin is Plus500, a platform that allows you to trade with different cryptocurrencies. It is an easy to use platform because it is intuitive and very straightforward. Among other things, it offers the possibility to practice trading by the use of free demos without making any deposit. The demo mode is always available even after switching (optionally) to real mode.
To open a buy or sell position with Litecoin on Plus500, you start by selecting Litecoin from the “Crypto” category (left column).
Clicking Cryptocurrencies will show the list of Cryptocurrencies in the main box on the right. As you can see, the “Sell” or “Buy” buttons with which you can open upward or downward positions will appear based on your prediction on the same line as that of Litecoin in the main panel.
By clicking on the Buy or Sell buttons, you can set the details of the position to be opened. These details are visible in the window that appears when you click the buttons.
The details of the trade include:
- The amount of Litecoin to be traded: here you can enter the value of your choice or use the plus and minus keys. In addition to the amount of Litecoin, you will always see the required margin.
- Margin requirement: CFDs are instruments subject to so-called leverage, a mechanism that allows the user to use very small amounts of money compared to those required for traditional investment. In the case of trading with Litecoin on Plus500, the leverage is 1:10, so with a €100 initial margin, you can trade with a total value of €1000 Litecoin.
- Stop Loss: We strongly recommend that you always set it. By setting the stop loss level (by ticking the box and defining a percentage), the platform is ordered to automatically close the position if the trade reaches the certain level of loss percentage that has been set.
- Stop Limit: works like stop loss, but for profit. By setting the stop limit level (by ticking the box and defining a percentage) the platform is ordered to automatically close the position if the trade reaches a certain level of profit percentage that has been set.
- Operational stop: is an advanced order in which the platform is asked to automatically update the stop loss level if the market moves in favor of the forecast. This type of order can be accessed by clicking “advanced”.
- Buy only when the rate is: is a useful order both when you want to “enter” the market once the quote has reached a certain level and to place an order for the next trading day. In the case when the box for this option already appears ticked and not modifiable, it means that the market is momentarily closed and you can only issue a purchase (or sale) position.
To complete the settings and open a position, just click the “Buy” or “Sell” button. Once the position is opened, it will start to affect the available capital immediately.
Note: the profit/loss counter (prof/per) will always start with a negative value. This is normal because when the position is opened the broker triggers the retention of the spread percentage. This is a small percentage that the broker retains as compensation for its CFD services.
When the position is closed, however, it will no longer affect the available capital. During the closure of the trading position, the maintenance margin is returned to the user along with the initial net margin of profits and losses.
Litecoin on IQ Option (CFD)
Although IQ Option has been a binary options broker for years and has since evolved with the introduction of classic and digital options, it has also expanded its services with CFDs. It is, therefore, possible to trade with Litecoin CFDs.
What best describe Litecoin CFDs on IQ Option?
The main feature of Litecoin CFDs offered by IQ Option is the absence of leverage.
Let’s move on to practice.
To trade Litecoin on IQ Option, just click the “+” button at the top to open the list of cryptocurrencies from which you can easily select Litecoin.
After selecting Litecoin, you can proceed by setting the amount to be used in the transaction at the right of the display. Finally, click “buy” or “sell”.
Depending on your forecast and analysis and the limits of the conditions set by IQ Option, you can close the position whenever you wish. By closing the position, you can recover the amount based on the new exchange rate between dollars (USD) and Litecoin CFDs, such as profit and loss net.