What is Margin Trading and how does it work?
As a holder of a long or short CFD you do not pay the full underlying value of the contract. However, you are required to deposit margin as collateral known as the initial margin. The initial margin is calculated as a percentage of the full contract value and the rate varies according to the market capitalisation and volatility of a particular share. For example if the initial margin is set at 10 % you can go long or short of a CFD worth £100,000 and deposit just £10,000, gaining ten times leverage.
