Margin call
A margin call is not good news. It happens when the amount of equity you hold in your margin account becomes too low to support your trades and other borrowing rights. When that happens you need to bolster your account with new funds to offset possible losses. You can put in safeguards to prevent a […]
Benefits and risks of margin trading
The benefits of trading on margin can be akin to turbo-charging a car. Your ‘engine’ (or buying) power is dramatically boosted for comparatively little initial cost – magnifying and intensifying performance. In a bull market, the compounded gains can be spectacular. But, in a bear market margin accounts for CFD trading also enable you to […]
Using margin for different asset classes
You can use margin to trade in most asset classes. You can, for example, invest directly in equities, buy your preferred shares and hold on to them until you are ready to sell. You would need the share price gain to be enough to repay the broker, including interest, and still make a profit. Assuming the shares […]
Getting started with margin trading
Margin trading means you don’t pay the full price of the asset. Instead, you only pay a percentage of the underlying value. The broker lends you the rest of the money for your trade. Trading on margin allows you to leverage gains when the price of an asset moves the way you predicted – or lose […]
What are leverage and margin?
Let’s start with leverage. Leverage is a catch-all term for when you use borrowed money to invest. You hope the profits will be greater than the interest payable on your borrowing. A business might borrow several times its profits to enable it to expand. Homebuyers take out mortgages of several times their earnings. The downside is that if […]
