How does trading on margin work?
Margin trading works by giving you full exposure to a market, but at a fraction of the capital you’d normally need to outlay. Your margin deposit is a percentage of the full position size, and the margin rate is determined by your trading provider. Markets with higher volatility or larger positions may require a bigger deposit.
Trading on margin amplifies both profits and losses. Consider the effect of an upward $15 price change on a share worth $100. With traditional investing, this will mean that you’ve earned a 15% profit.
By comparison, at a margin rate of 10% on the same share, you’d only outlay $10 to take a position. The $15 upward price movement would now result in a profit of 150% on your initial deposit. If the price movement turned against you by $10, then you’d lose 100% of your initial deposit.
Remember, with us you can only trade derivatives via CFDs.
