Margin and Leverage
Margin and leverage
  1. What is margin?
  2. What is leverage?
  3. What is the margin level for each market?
  4. Margin requirements for large trade sizes
  5. Margins for hedging
  6. What is a margin call?
  7. What is a margin close out?
  8. Margin close out levels
  9. Does leverage affect margin?
  10. How do I change my CFD trading account leverage or margin?
  11. Chat to our Client Management
  12. Can't find what you're looking for?

What is margin?

Margin is the amount of money you need to deposit with us in order to place a trade and maintain that position.

When you place a trade, you must have enough net equity (cash and unrealised P&L) in your CFD account to pay the margin requirement – as well as any commission (if applicable) and/or other charges, including the spread and financing. Margin is not a fee; it is deducted from your account at the time of placing a trade and returned when the position is closed.

What is leverage?

Leverage is a trading tool that uses borrowed capital to increase the potential return on investment, allowing traders to buy or sell a greater amount of a financial asset than the funds used to open the position. As a result, traders can gain a large exposure to the financial markets for a relatively small initial deposit. Remember that with greater exposure comes greater trading risk. The higher the leverage, the faster profits can be made, but also the faster your initial funds can be lost.

Learn more about margin and leverage.

What is the margin level for each market?

Our margin levels differ according to market, asset class and position size. You can find out the specific margin of each instrument in the Market 360 section in our trading platforms.

To calculate the amount of funds required to cover the margin requirement when you open a CFD position, simply multiply the total notional value of your trade (number of contracts traded X price of instrument) by its margin factor.

Learn more about how margin and leverage work in CFD trading.

With City Index's trading platforms, you can calculate your margin before placing a trade through the trading platform's margin calculator, monitor each position's margin requirement or review your trading account's total margin.

Margin requirements for large trade sizes

The larger the trade size, the higher the risk level associated with the trade. Therefore, we may increase our margin requirements for larger, or additional, trades within an instrument. To do this, we increase the size of the margin requirement at specific levels, known as 'step margin levels'.  For example, in Company ABC:

 CFD Quantity  Margin
 0-1,000  10%
 1,000-10,000  20%
 10,000-50,000  30%
 50,000  40%

If you were to open a position on company ABC by buying 1,000 CFDs, your margin requirement would be 10%. If you then place a trade for an additional 1,000 CFDs in the same market, the extra 1,000 would now be subject to the 20% margin requirement.

Margins for hedging

Hedging margins are set to the 'longest leg,' so you will only be charged margin for the longer portion of the trade, and nothing for the shorter leg.

For example, you are trading CFDs and have two open Wall Street CFD positions, initially selling a quantity of 10 and then buying a quantity of 5. In this case, you would only be charged margin for the original, larger side of the trade, the Wall Street short 10 positions. If the margin for selling 10 Wall Street is $15,000 and buying 5 Wall Street is $7,500, you would only need to provide enough margin to cover the original sell position for both trades in this market.

What is a margin call?

‘Margin call’ refers to the situation when the balance on your trading account falls below the minimum amount required to maintain your open positions. You will be placed on margin call when your margin indicator level drops below 100%, and we will notify you via email.

If your account is subject to a margin call, then you will need to take action by either depositing additional funds to the account, or by reducing or closing positions to reduce the maintenance margin required. If your account remains on margin call for a prolonged period of time then we may close one or more of your open positions to bring the account balance up to the required maintenance level.

What is a margin close out?

Margin close out (MCO) refers to the automatic closing of one or more of your open positions once the funds in your trading account reach a certain threshold. The closeout level for City Index is set at 50%. If your margin indicator is at or below the MCO level, we are required to close any or all your open positions as quickly as possible to protect you from incurring further losses.

It is your responsibility to monitor your CFD trading accounts to maintain your margin requirements, and not rely on us to close out your open positions should they be nearing, or exceed, the margin closeout levels.

The Margin Level Indicator on the trading platform provides you with a convenient way of monitoring your margin level.

The calculation for the margin indicator is determined by the Net Equity in your CFD trading account divided by your Total Margin Requirement, multiplied by 100. To raise your margin level, do one or more of the following:

  • Deposit funds
  • Close or part close positions

Margin close out levels

Margin close out levels vary by trading account type. If your trading account offers shares, then your MCO level will be 50% of your total margin requirement. If it does not offer shares your MCO level will be 100%. If you drop below your margin requirements, your largest losing position will be closed first, followed by the next largest, and so on until your margin level moves back above the required minimum amount. This is to protect you from incurring further losses.

Read more about managing risk in CFD trading.

Does leverage affect margin?

Yes, leverage will affect your margin. Essentially, the higher leverage you employ the lower the margin requirement for any given market.

For example, if you want to open a trade worth $100 with 2x leverage, you need to deposit (100/2) 50% of your position’s full size as margin, or $50. If you were to trade with 5x leverage instead, then you’d only need to deposit (100/5) $20.

How do I change my CFD trading account leverage or margin?

At City Index, regulations require us to offer specific margin requirements on each individual market, so you can’t change the leverage on your CFD trading account.

Accredited Investors will be subject to minimum 2% margin on FX trades, as opposed to 5% for Retail clients.

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