LEVERAGING WITH CFD 

CFD is a financial instrument which is traded using margin/leverage. Hence, trading a CFDs exposes you the full risk (and gain) of the underlying stock without having to pay the full price of the underlying instrument. Hence it is potentially more risky than trading stock directly.

The same margin of 10% from the open face value applies to both buyers and sellers when initiating a new position.

Even though your outlay is small in comparison to the equivalent physical trade, you will still be exposed to the same potential profit and loss paid is lowered than the physical transaction, you will receive the same maximum profit and loss. This means your Return On Investment (ROI) is magnified.

CFD's Trading Example: 

• You wish to buy 10 lots (10,000 shares) General Electric Co. (GE) at US $ 15.00.


• The margin requirement for the GE CFD is fixed at 10% from the open face value.


• The open face value is US $ 150,000.- (US $ 15.00 x 10,000 shares).


• You only need 10% of the face value to trade.


• US $ 15,000.- (US $ 150,000.- x 10%).