What does trading against margin mean?
What does a long-CFD position mean?
What does a short-CFD position mean?
What does roll-over interest mean in Forex?

 

What does trading against margin mean?

Margin trading

CFD's, futures and Forex are traded against margin. The margin consists of the money on the trading account +/- unrealized profit / loss of open positions. Margin trading lets the trader have positions that are several times bigger than his own capital if he so wants to. This so called leverage makes it possible to make big profits / losses compared to the traders own capital tied to the positions.  The margin available to the trader changes when the market prices moves; if the price moves in favour of the trader's position the available margin grows and if the positon goes against the trader the available margin becomes smaller. It is important that the trader has enough margin to cover his positions at all times. In case the trader's available margin falls below the total margin requirment of his open positions, all his positions will be closed automatically at market prices (so called "margin call").
A list of margin requirments is available here.

In the example below, a trader whose starting balance was 10 000 Euros has bought 1000 Nokia CFD's at 12.

Account Nokia CFD Unrealized Value of 15% margin Available
balance price profit / loss position requirement margin
10,000.00 10.50 -1,500.00 10,500.00 1,575.00 6,925.00
10,000.00 11.00 -1,000.00 11,000.00 1,650.00 7,350.00
10,000.00 11.50 -500.00 11,500.00 1,725.00 7,775.00
10,000.00 12.00 0.00 12,000.00 1,800.00 8,200.00
10,000.00 12.50 500.00 12,500.00 1,875.00 8,625.00
10,000.00 13.00 1,000.00 13,000.00 1,950.00 9,050.00
10,000.00 13.50 1,500.00 13,500.00 2,025.00 9,475.00
10,000.00 14.00 2,000.00 14,000.00 2,100.00 9,900.00
10,000.00 14.50 2,500.00 14,500.00 2,175.00 10,325.00

 

What does a long-CFD position mean?

A trader who expects the price of a stock to rise can establish a so called long-position by buying the CFD's for the stock with the goal of selling them for a higher price in the future. A financing cost is charged for long-positions held overnight- this is comparable to the trader having bought the underlying stock position with borrowed money. You can see the current financing cost in our current price list.
 
A Trader who expects the price of a stock to fall can take a so called short-position by selling the stock's CFD's without owning them from before with the goal of buying them for a lower price in the future. A short position held overnight usually pays financing revenue to the trader. You can see the current financing revenue in our current price list.

 

What does roll-over interest mean in Forex?

For positions left open overnight, industry standard “rollover” interest, based on short-term interest rates, is either charged or paid, depending on the direction of the trade vis-à-vis the interest rate differential between the currencies that make up the position.
The positions are automatically rolled over at 5PM EST (New York time).


 

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