If you have 10, 000 and open a CFD you will be able to place value and distribute between 40 000 and 100 000 in cash equivalent equity.
This is because the margin requirements of between 10-25% are in force for more stock exchange listed London stock.
Greedy people that can use the maximum allowance.
I'll keep the simple but if you have 10, 000 in your account and buy 100, 000 worth of long positions Barclays, which is like buying shares with 33,000 Barclays shares only 10, 000 to cover this.
If the share dropped by 10% of the value ... which really isn't a huge swing for Barclays, you will be called margin and whether you have cash reserves to shore up your account automatically or you can be traded off your seat and lose 100% of your original 10, 000 to reduce 10% due to leverage.
Understanding this very basic concept about simple leverage is the trick to use CFDs correctly.Personally, I never allow myself to use more then 50% of my allowance.In practice, it is usually around 25%.And I don't use stop loss also say a accessible amount equal to 25% of what is CFD account on a savings account that pays the CFD account in case of emergency, by using a quick debit card payment.
Greed is a murderer, if you use leveraged products and a Tip If you plan to short ... don't go in all guns blazing. Use to get started with a small position size and build from there.
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