David breaks it down to the basics once again and explains the meaning of the word as well as the scenarios in which it’s used. He makes several trades on the Trading 212 platform – one in Forex and one for a stock CFD – and points to the exact value of the margin as it changes once the trade has been opened.
He also shows traders something that they might overlook – the cost of holding a position over night if you are trading on margin, i.e. with money borrowed from the broker.
For those of you that like to have something written down, here’s the definition of margin trading – it means that an investor pays only a percentage of the value of the asset and borrows the rest from the broker. The latter acts as a lender and uses the deposit as a collateral on the loan. The margin itself is the amount in the account that the investor has put down and is usually displayed as a percentage.
Still got some questions about margin trading? Let us know in the comments below.
At Trading 212 we provide an execution only service. This video should not be construed as investment advice. Investments can fall and rise. Capital at risk. CFDs are higher risk because of leverage.