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The link between CFDs and margin

{}Posted in2023/2/26 7:58:23 | 7Browse

In the cashback forex forexrebates market, CFDs have become an important forexcashrebatevestment method for many professional traders. Before the popularity of CFDs, traders were investing in multiple financial markets, especially in the traditional foreign exchange market, is the amount of capital required is relatively high, Forex rebate for Exness each financial product requires investors to open a corresponding account, if you want to make investments in various global markets If you want to invest in various markets around the world, you need to open different accounts in different markets, and the emergence of CFDs, for more individual foreign exchange traders to provide a convenient cashbackforexexness model, trading varieties are up to hundreds of species, including stocks, indices and bonds and other mainstream global markets What is a CFD Contract for Difference (ContractsforDifference, CFD), is derived from the stock Contracts for Difference (CFDs) are financial products that are derived from equities and contain a high degree of leverage, and generally refer to trading methods that do not involve the exchange of physical commodities or securities, but are settled in cash for the difference between the settlement price and the contract price. Contracts allow traders to contract the difference in price of an asset for the period from opening to closing a position without paying any commissions, transaction fees, calculation fees, etc. CFDs are a flexible trading tool that started out as an effective hedge against securities risk for large institutions, but now it has become a common investment tool for retail investors around the world How does CFD trading work? When trading CFDs, traders do not buy or sell the underlying physical assets, but rather buy or sell a certain amount of units of financial instruments based on their judgement of rising or falling prices, such as stocks, bonds and foreign exchange futures. Hedging a portfolio with the help of CFDs is a strategy often used by investors, especially in volatile markets, and traders can also use a variety of risk control tools provided by brokers to assist in trading, such as "guaranteed stops" and "trailing stops "What is Forex Margin and Leverage? Foreign exchange ForexrebateforExness is one of the financial derivatives, is a certain percentage of funds in the foreign exchange market to buy and sell a variety of currencies, the direction of exchange rate fluctuations, to expand a hundred times to hundreds of times the value of the transaction of financial derivatives, also known as leveraged foreign exchange foreign exchange margin has the characteristics of futures, used to avoid foreign exchange risk, that is, the exchange rate risk leverage is a major feature of foreign exchange margin trading, is the trader to increase the initial Leverage is a tool used by traders to increase the initial return on investment, the ease of use of leverage is also one of the reasons for the popularity of foreign exchange margin trading in leveraged foreign exchange trading, the purchase of higher than the actual account balance value of foreign exchange contracts, the need to make a cash guarantee, the higher the leverage ratio, the less margin capital required CFDs is a leveraged product, in other words, traders only need to invest a small amount of margin can be obtained In other words, traders only need to invest a small amount of margin to obtain a much higher position in the market, also known as "margin trading", traders can invest a small percentage of the total position to carry out a transaction, while enjoying the full benefits and risks associated with market fluctuations using margin trading, making full use of the principle of leverage to achieve small gains. For example, with 100 times leverage, when trading a standard lot of USD/JPY worth $100,000, i.e., the investors total transaction amount is $100,000, but the investor only needs to have $1,000 in margin. Although margin trading can expand the gains of consumers, it can also magnify losses, as they are calculated on the full value of the position, which means that the traders losses may exceed the amount of capital he has invested in the actual benefits of risk control also requires traders to focus on CFDs and margin margin is one of the characteristics of CFDs, a portion of the margin submitted when opening a position, so that the investors capital utilization efficiency is increased, precisely because of the inclusion of such leverage The more leverage, the smaller the investment capital, the more traders can participate, and the greater the liquidity of foreign exchange will become. Presence, such customers are easy to lose money after the UK FCA proposed a leverage cap of 1:50 in December 2016, in January this year, the European Securities and Markets Authority ESMA in order to protect retail investors also issued a graded leverage call announcement, to set 1:30 as the leverage cap and limit the complexity of offering or selling CFD trading financial products to retail investors and excessive This intervention by ESMA is also the most effective and direct tool to address the issue of investor protection. The margin model has attracted more ordinary investors to CFD trading, but also brings a high level of risk to CFD trading.