Understand Leverage & Margin Requirements when trading with AFXMarkets
One of the most distinctive characteristics of trading forex and CFDs is applying leverage to get exposure to financial products across numerous asset classes. However, the greater exposure you have to the market, the greater your risks are. Therefore, leverage should be used responsibly and only by those who understand the principles of leveraging positions and the associated risks involved.
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How Does Leverage Work?
The funds you deposit to your trading account is considered your margin. Leverage is a mechanism which allows you to open positions far greater than your initial margin.
For example, if you deposit 10,000 euros to a trading account, and have a maximum leverage of 1:30, your buying power can be potentially as much as €300,000. However, you absolutely should not allocate the entire value of your account to one trade. The higher your exposure is to the market; a small price movement will significantly impact profits or losses.
If for example, you open a long position for 10,000 EUR/USD, €333.33 of your margin will be used, leaving you with €9,666.67 free margin which may be used for other trades or maintained as part of a healthy risk management strategy.
As a European investment firm regulated by the Cyprus Securities and Exchange Commission (CySEC), AFXMarkets follows MiFID II and the rules established by the European Securities and Markets Authority (ESMA), as well as CySEC. Since 1st of August 2018, ESMA has required all EU licensed CFD providers to follow strict conditions concerning how much leverage may be offered to non-professional clients.
|FINANCIAL INSTRUMENTS||MAX LEVERAGE|
|Major forex pairs, such as USD/JPY, EUR/USD, GBP/USD||1:30|
|Minor forex pairs, such as USD/MXN, EUR/CZK, GBP/SGD||1:20|
|Major indices, such as the US30, DAX30, FTSE100||1:20|
|Futures (hard & soft commodities), such as Copper vs USD or Wheat vs USD||1:10|
|Energy products, such as Brent vs USD||1:10|
|Minor indices, such as ASX, HSI||1:10|
|Shares of US, UK, French & German listed companies||1:5|
|Digital assets, such as BTC/USD, ETH/USD||1:2|
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