Understanding Safe Leverage
Posted by becky on December 24th, 2019
Brokers and investors are attracted to Contracts For Difference (CFDs) and Forex in general due to the leveraged opportunities they offer, the low initial capital required to commence trading and the perceived ease of trading. However many CFD traders are oblivious to the risks and lack understanding regarding the impact of leveraging.
CFDs can be defined as high-risk derivative devices typically used by traders to take geared, short-term positions in volatile markets. Leverage is the big attraction. Trading on margin via CFDs requires lower initial cash deposits than the equivalent share purchase but you are still exposed to the same potential profit and loss.
The leverage offered by your broker magnifies the underlying movement of the trade share which can be positive or negative. CFD traders often look only at the extra financial power that leverage gives them and ignore the fact that leverage is a double-edged sword. Firstly it is important to gain an understanding of all the elements of CFDs and the leverage effect they can offer via the margin feature
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About the Authorbecky
Joined: December 24th, 2019
Articles Posted: 3
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