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Lindsay R

What is leverage in CFD

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Hi there,

This is my second month after investing in CFDs. I have heard about leverage and I want to learn more about it from an expert. Can someone please shed some light on this.

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Hi Lindsay,

Leverage in CFD is the ability to use a deposit, referred to as a margin, to gain access to the total value of the trade. You only invest a small amount, and you have exposure to the market while your provider gives you with the rest. As a result, you can earn a higher yield on your equity. Correspondingly, the losses can be as high as the gains, so it depends on how the market goes. This is because the profits and losses are calculated according to the full contract value after closing the trade.
Using leverage also helps you to go short. Going short is using leverage to speculate on how the markets are going up or falling and taking advantage appropriately.
Similarly, leverage enables you to have free cash to invest elsewhere without having to put it all in CFDs.
 
 

 

 

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