What are the CFD Margin Requirements?

Submitted by Share Trading on 11 February, 2010 - 13:02

Learn about CFD Margin Requirements

When you trade CFDs, traders have CFD margin requirements to maintain. The CFD margin is like a deposit, kind of like a deposit for a house mortgage. The margin requirement is used to protect the CFD provider if they need to exit the trader’s position. Initial margin requirements varies from stock to stock, usually starts at 3% for blue chip companies and then varies all the way to 80% for unknown rarely traded company stock. However for currencies (forex trading), the margin requirement is as low as 1% (or 1 to 100).

Your CFD margin requirements is calculated as the value of your underlying stock changes during trade. As the value underlying security fluctuates, so does your CFD margin requirements. So it is important to have money in your account to cover your CFD margin requirements in your account in case your position goes against you. Also keep in mind that, if your position goes against you, the loss will also be deducted from your account (and likewise if your position is in profit, this will be added to your account value as the price moves).