What Is Margin?
Margin is the amount of capital required to support a leveraged position.
Think of it as collateral.
When you open a leveraged position, your provider may reserve a portion of your available funds as margin.
Margin Isn’t the Same as Risk
This is extremely important.
Margin is related to the amount required to maintain the position.
Risk is the amount you could lose if your trade reaches your stop-loss.
You might use £200 of margin while only planning to risk £50.
Those numbers are not the same.
Key Takeaways
- Margin supports leveraged positions.
- Margin and risk are different concepts.
- Never confuse the amount required to open a trade with the amount you are risking.
Disclaimer
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
