What is CFD trading?
CFD trading with leverage.
Margin trading of CFDs allows you to profit from changes in the price of the underlying asset, investing a significantly smaller amount than is necessary for the actual acquisition of these assets. However, it should be borne in mind that losses from such transactions will also be appropriate. To cover them, it is necessary to keep free funds in the account: as soon as they are not enough, the transaction will be automatically closed.
An important factor is that brokers can independently set the amount of leverage, which is why you can find offices offering margin trading in the ratio of both 1:5 and 1:500. These values demonstrate the ratio in which the broker is ready to provide borrowed funds to the trader in comparison with his own. If you use the leverage of 1:10, then you can buy a cfd for $ 10 for one dollar.
CFD trading explained
An example of transactions with a shoulder.
Let's look at how this works on a simplified example. With a deposit of $ 630, the trader sells a contract for the difference in prices of 100 Microsoft shares at a price of $ 130 per share. That is, the total amount of the position is$ 13,000, but the trader uses a leverage of 1: 100. This means that he pays only $ 130, leaving the remaining 500 in case of covering losses.