Margin and Leverage Explained
Leveraged trading, also known as trading on margin, refers to your ability to control a large position with a relatively small amount of capital. When you trade CFDs using leverage, you'll only need to put down a fraction of the total trade size to open a position, known as the margin, while being exposed to the price movements of the whole position.
For example, a margin of 5% means you'll need at least 5% of the total value of the position on account. The remaining funds are effectively advanced to you by the broker.
Example: Trading with 5% Margin
Scenario: You want to make a long trade on a single $100 stock at 5% margin.
- • Your margin requirement is $5
- • If the stock goes up to $105 and you close the position, your profit is the full $5, minus fees, despite only putting down 5% of the value of the position
- • If the stock falls to $95 and you close out, your loss is also $5, despite only having $5 on margin
Important Considerations
Trading with leverage means you have the potential to profit and lose amounts that exceed your initial deposit. Because of this, it's important to trade with caution and have a solid risk-management plan in place.
Margin requirements differ depending on the market you want to trade. The lowest margin requirement ratio we offer currently is 0.05% (max leverage 200:1). You can check the margin requirements of the instrument you are trading on our asset pages, like our gold price page.
It's worth noting that if the equity in your account falls below a certain level, you'll get a margin call requesting to fund your account or reduce the size of your position(s). In extreme cases, if you don't take action, a broker may be forced to close your positions.
Risk Warning
Leverage can amplify both profits and losses beyond your initial deposit
Margin Calls
Monitor your account equity - falling below certain levels triggers margin calls
Risk Management
Always have a solid risk-management plan when trading with leverage
Margin Requirements
Margin requirements vary by market - check specific requirements for each instrument
Ready to Learn About Margin Trading?
Understand how to use leverage effectively while managing risk in your trading strategy
