CFD trading spreads and margins

Our spreads and margins explained

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The first thing you need to understand is that all CFDs have a buy price and a sell price. The difference between them is called the spread. The second thing to remember is that when you trade CFDs on CMC Markets’ CFD trading platform you need to decide how much leverage you want to use before you place your trade. A feature of the our Next Generation CFD trading platform is that it allows you to choose whether you want to fund the whole position yourself, or trade using leverage. In fact, you can dial your leverage up or dial it down (above the default margin). On the new CMC Markets trading platform, this is called customisable leverage.

Guide to spreads

Here’s a quick guide to the things you need to know about spreads:

• The buy price is always higher than the sell price
• The spread will vary from market to market, and can sometimes change depending on market volatility. The wider the spread, the more the market will need to move before you can make a profit
• You can always see both the buy price and the sell price, so it’s easy to understand the spread for any trade.
• CMC Markets offers tight spreads from as low as 0.7 points on popular instruments such as the UK100, US30, EUR/USD and many more. You can find out more about these great prices here.
• The tighter the spread, the faster you can make profits (or losses).
• Spreads can change depending on market conditions, volatility and liquidity. The CMC Markets platform offers some of the most consistent spreads around, and we publish our historical spreads within our charting package so you can see how good they are, no matter what the market is doing.

Guide to leverage

When you trade CFDs, you don’t buy or sell the actual product – you’re just trading on the movement of that product’s price. For each trade you can choose what level of leverage you would like to apply to your trade.

Here’s a quick guide to the things you need to know about margin:

• When you trade CFDs on the CMC Markets platform you can choose whether you want to fund the whole position yourself or, if you want to trade using leverage, you can choose to ‘borrow’ the maximum amount – on some products this is as high as 98%.
• Trading using leverage gives you more profit and loss potential because your trade exposure is greater than the margin amount.
• Because markets affect your account in real time, the margin amount has to be maintained as long as the position remains open.
• If your position loses money you may need to top up your margin to keep the position open
• In the factsheet for each product you can see the maximum amount you are allowed to ‘borrow’.

Platform features to manage your risk

Here are three CMC Markets platform features that can help you manage your risk when trading CFDs:

1. If your account value falls below 100% of your total margin requirement, the platform will attempt to notify you that this level has been reached. (The total margin requirement is the sum of margin required for all positions on your account.) Please remember that this notification is only provided as a courtesy and you must not rely on it. It is your obligation to monitor your account.
2. With our transaction-based stop loss feature the platform sets a stop loss for each new trade, equal to the margin. If you wish, you can turn off this feature in your account preferences.
3. You can set a trailing stop loss for any position. Trailing stop losses can help you take greater advantage of a profitable trade. If the price moves in your favour, then your stop loss will also move in the same direction. Then if the market reverses, your stop loss will be triggered at its new level. This can help you to lock in profits for a successful trade.