Margin in Spread Betting and CFD Trading

LONDON, October 5, 2011 -

In spread betting and CFD trading, margin allows you to trade with only a percentage of your position’s total value in your account. Here, City Index (www.cityindex.co.uk/) looks at what this means for your trading platform management.

An example of margin in spread betting

If a trader buys £2,000 of shares in standard dealing, he or she has to pay the full £2,000 value to do so. In contrast, if you open a spread betting or CFD trading position worth £2,000 with City Index, you would only have to pay between 5% and 15% - or £100 to £300. This deposit, required for each open trade on your account, is known as the margin requirement.

When you open a trade your account must hold enough funds to cover the margin requirement. It must also maintain the margin requirement deposit level in line with any profits/losses going through your account. If your margin deposit level does not remain above the margin close-out level at all times, some or all of your positions may be closed.

Margin is there to help you trade responsibly, ensuring that you never overstretch your financial means. To avoid enforced closure of your trades, follow a considered trading strategy and always employ appropriate risk management measures.

Learn more about trading with a free spread betting or CFD trading seminar from City Index. Visit www.cityindex.co.uk/learn-to-trade/ for more details.

Spread betting and CFD trading are leveraged products which can result in losses greater than your initial deposit. Ensure you fully understand the risks.

About City Index:

Today more and more individual traders are discovering the benefits of derivatives, and many of them are discovering them through a City Index trading platform.

As a group, we transact in excess of 1.5 million trades every month in over 50 countries. We provide access to a wide range of instruments including margined foreign exchange, CFD trading and, in the UK, spread betting.

We constantly look to improve the performance of our platforms and expand our range of services. The result is that our customers benefit from innovative financial trading tools with transparent pricing, competitive spreads, and a high standard of customer support. Visit www.cityindex.co.uk/ for more information.

Contact: Joshua Raymond, City Index, +44(0)20-7107-7002, joshua.raymond[at]cityindex.co.uk