CFD Trading and Leverage

What is CFD trading?

A contract for difference (CFD) is a popular form of trading on the financial market.

CFD Trading

CFD trading offers traders and investors an opportunity to speculate on the price movement of the assets, without owning the underlying asset itself. In contrast with traditional investments, CFD trading allows traders to take positions on falling prices as well.
Since owning the asset is not a condition with CFDs, an investor can sell the asset and profit when prices fall or lose when prices go up. CFD trading also gives investors access to the global markets – such as shares, cryptos, indices and commodities – in a single trading environment.

Leverage

Means you only put down a fraction of the value of your trade. In other words, it significantly enhances your buying power by multiple your original investment, allowing you to control a position much larger than the original amount invested.
It is often described as being borrowed funds from the broker, although you are not physically borrowing any money. More information about leverage can be found below.

Margin and Leverage

Leverage

While leverage multiplies your amount invested, margin is the required amount invested for any given trade.
With an investment of $1,000 and leverage 1:30, you can buy or sell an asset that is worth $1,000 x 30 = $30,000.

Margin

Margin is the reversed logic of the above example. If you want to open a trade that is worth $120,000 and leverage is 1:30, your required margin (amount invested) will be $120,000 / 30 = $4,000.

Leverage and margin requirement varies between 1:2 to 1:30 depending on the asset class traded by retail clients

What are the costs of CFD trading?

Spread: When trading CFDs you pay the spread, which is the difference between the buy and sell price. If you enter a buy trade you use the buy price quoted and exit this trade, using the sell price, and vice versa. The narrower the spread, the less the price needs to move in your favour before you start making a profit; or if the price moves against you, a loss. We offer consistently competitive spreads.

Swap fees (also called the interest, rollover or overnight fees): At the end of each trading day, any positions open in your account may be subject to a charge called a swap fee. The swap cost can be positive or negative depending on the direction of your position and the applicable interest rates. For more information regarding the swap calculation formulas please click Commissions and Swap Charges.

Please note that the calculation formula may vary according to the instrument type and can be found in each section of the link above.