Ripple is a global real-time payment system and like other alternative payment systems and cryptocurrencies, it belongs to a category of instruments that are very hard to understand but represent the future of trading transactions.
In this article, we will provide an overview of this cryptocurrency and then see how we can trade with Ripple online using existing broker platforms that include Ripple as one of its cryptocurrencies.
What is Ripple?
Although not as popular as Bitcoin or Ethereum, Ripple is a payment protocol and exchange network that has gained in importance especially when it was used by large companies such as Unicredit, UBS, and Santander. In simpler terms, we could also discuss the platform and the cryptocurrency known for this abbreviation (XRP).
The difference between Ripple and other systems is that Ripple works with banks to transform the way they send money around the world (settlement). The end users of Ripple are mainly banks.
Ripple also replaces two traditional payment structures: Swift and Clearing House. Swift is an electronic communication protocol that realizes the payment arrangements done between two banks. Clearing House is a system of banks that ensure the implementation of all transactions in the interbank circuit.
Its success and its use by large companies are mainly due to the possibility to carry out financial transactions worldwide at significantly reduced costs that are both secure and instantaneous. It supports tokens that represent cryptocurrencies, legal tender, commodities or any other unit of value such as minutes of call (phone) or miles of free travel for frequent travelers. It can, therefore, be defined as a value exchange network.
In this regard, Ripple is defined as the most decentralized of the value exchange networks.
Trading with Ripple (XRP)
The Ripple system should be clearly distinguished from the ripple cryptocurrency (lower case). The latter is indicated by the abbreviation XRP.
Among the various existing ways of aiming for economic results based on changes in the value of ripple prices, online trading with CFDs is one of them.
For detailed information on these instruments, please refer to the complete guide to CFDs. Here we will make a brief but comprehensive summary of all its most important aspects. The recommended platforms for trading ripple are IQOption and Plus500.
So let’s get started.
CFDs are financial instruments that replicate the performance of another financial instrument, which is called an asset or an underlying asset. In the case of Ripple CFDs, CFDs replicate the performance of the ripple price.
Note: CFD Ripple trading does not buy ripples, but rather, it does trade securities that replicate the ripple’s performance (quotes). This means that if you buy a CFD Ripple, you will not have any ripple. In addition, trading with Ripple CFDs is intended as a short-term operation, unlike traditional investment.
In practice, with CFDs you can buy long (rise) or short (fall) securities according to your quote forecast. Long positions are also called buy positions while short ones are called sell positions.
Let’s be clear about the following ideas:
- Opening a purchase position obtains positive economic results proportional to the increase that intervene between the opening of a purchase position and that of its closure.
- By opening a sell position, on the contrary, positive economic results are obtained in proportion to the decrease that occurs between the opening of the sell position and its closure.
So, if you think that at a certain moment the value of the ripple will rise in value, you could open a purchase position. On the contrary, if you think that at a certain moment this value will decrease, you could open a sell position.
How to Trade with Ripple on Plus500
One of the most important brokers to offer the possibility of trading with ripple is Plus500. This broker provides a trading platform that allows you to trade with two different types of accounts, a demo and a real one, in order to practice with virtual and real funds.
To open a trading position on Plus500 that relates to Ripple, start by selecting Ripple from the “Crypto” category.
As you can see, on the same line as Ripple, the “Sell” or “Buy” buttons appear with which you can open positions upwards or downwards based on your forecast.
Once you have clicked Sell or Buy, you can set the details of the opening position.
These details include:
- The amount of ripple to trade (using the plus and minus buttons you can increase or decrease). In this context, you will always see the amount of the initial margin, i.e. the amount of money you are actually trading for. This is because CFDs are leveraged instruments so you would utilize a smaller amount of money than you normally use for the securities in a traditional investment. In the case of trading with ripple on Plus500, the leverage is 1:2 so with $10 of initial margin, you can trade a total value of $20. The amount of ripple to trade with is the only factor that must necessarily be set because all other orders below are optional and you may choose to apply or not apply them. However, we recommend that you use at least the stop loss in any case.
- Stop Loss: by setting the stop loss level, the platform is ordered to automatically close the position if the trade reaches a certain loss level.
- Stop Limit: by setting the stop loss level, the platform is ordered to automatically close the position if the trade reaches a certain profit level.
- Guaranteed closure: with this order, which is not available for all instruments, the platform is ordered to automatically close a position in the event of sudden and drastic price changes.
- Operating stop: this order asks the platform to automatically update the stop loss bar if the market moves in its favor. This type of order can be accessed by clicking “advanced”.
- Buy only when the rate is: this order asks the platform to open a buying or selling position only if the rate or quote reaches a certain level. In the case in which the box relative to such order already appears ticked and not modifiable, it means that the market is momentarily closed (during non-trading hours) but you can issue an order of purchase (or of sale) on the next trading day.
Once the desired values have been set, just click the “Buy” or “Sell” button to open an upward or downward position. Once the position has been opened, it will immediately start to affect the available capital.
Don’t be surprised that the profit/loss marker (prof/per) will start with a negative value. This is normal as the broker retains a percentage of the spread whenever a position opens and this represents a small percentage that the broker retains as compensation for its CFD service.
When a position closes, however, it will no longer have an effect on the capital. Whenever this happens, the maintenance margin will be returned to the user along with the initial net margin of profits and losses.
Ripple on IQ Option (CFD)
To trade with Ripple, you can also consider the approach proposed by IQ Option. Although this broker has long specialized in binary options, it also offers other interesting tools such as classic and digital options. However, what interests us the most is that nowadays it also provides the opportunity to trade with ripple.
What best describe IQ Option’s Ripple CFDs?
They are mainly characterized by the absence of leverage.
To trade with ripple on IQ Option, just click the “+” button at the top to choose the ripple from the cryptocurrencies in the Krypto category as shown in the following figure.
After selecting “Ripple”, you can easily proceed by setting the amount to be used in the transaction. Finally, you need to click the “buy” or “sell” option.
You will be able to close the position whenever you believe that the transaction is going according to your own forecasts and analysis based on the eventual limits dictated by the conditions set by IQ Option. By closing the position, you can recover the amount according to the new exchange rate between the dollar and IQ Option’s ripple CFDs as well as the net based on the profits and losses incurred.