cfds – CFD margin – price of opening the position
CFD margin – price of opening the position – Transaction size
A very important aspect to understand about CFD’s is that of margin. We have already mentioned the leverage
and the “margin”. Below we provide an example in such a way that we can understand how it works in the best possible way.
First, we distinguish the two types of margins in the CFD trading:
Initial margin. This is the amount that the user will actually invest for negotiation, and is given by the following expression: (price of opening the position * Transaction size) * Percentage of the initial margin.
We buy 30 Facebook CFD shares for $100 the one (“buy” position) and the initial margin of 10%. In this case the value of the position would be (30 * 100) * 10%, i.e. (3000) 10% or $300.
Maintenance margin. This is the margin that is required to hold the position open and that is returned when the position is closed. The amount of the margin is given by the expression: (opening price of the position * Transaction size) * Percentage of maintenance margin.
We purchase 30 CFD Facebook shares for $100 One, for which a 5% maintenance margin is expected. In this case, the amount of the maintenance margin is given by (30 * 100) * 5% or (3000) * 5% or $150.
Taking as a case the two examples, to open a purchase position on the Facebook CFDs shares I will have to subtract to the available capital in the trading account $300 + $150.
At this point, what happens?
Changes in stock prices will be available on the capital
When you decide to close the position, you will receive back the margin amounts
Costs, how much do you need to work with CFDs?
The cost issue can be included among the advantages because as we have seen in detail, trading with CFDs requires much lower sums than the traditional investment. Also with regard to the spread, or what is incumbent on the broker for its service, these are very small percentages and much smaller than the commissions asked by most banks.
CFDs Online brokers instead of earning from commissions, profit from opening positions, so the more positions open, the more the broker earns.
With CFD Trading Then there is no conflict of interest because the broker does not profit from the loss of the trader, but from the amount of its transactions, each of which allows the broker to withhold a small percentage that will depend on the type of Negotiated instrument. Usually, Forex offers the lowest spreads, which can also be only 2 pips, as in the case of the Plus500 platform.
Should you be an expert to trade CFDs?
As in all areas more you know a “territory” more moves better, so even if the practice of trading CFD’s is very simple, learning, updating, information and a little ‘ commitment certainly help in obtaining results More and more satisfying.
In the end it is always the financial market, so the more you follow it carefully and the more you will be able to take advantage of the different events to earn on price rises of the various securities quoted on the stock exchange.