What is CFD GLOSSARY ?
Here we have compiled a list of commonly used terms in Forex and CFD of Forex trading
Leverage increases your purchasing power hence enables you to gain a large exposure to a financial market while only tying up a relatively small amount of your capital. CFDs are leveraged, which means you only have to put down a small deposit for much larger exposure. Leverage increases your profit potential and the risk of losing your capital. CryptosOptions CFDs have a static leverage that depends on the Asset you’re trading.
When trading CFDs on leverage, you must maintain a certain level of funds in your account (the necessary margin), also known as a good faith deposit. Calculating and understanding your necessary margin requirements beforehand allows you to apply good risk management and avoid any unnecessary margin calls resulting in the closing of a position due to not enough margin in your account. The margin of thriveoptions CFDs will be the invested amount you select prior to opening the position.
Margin Call refers to the situation where the broker ask for additional funds to cover losses from your lose making positions. Failure to meet margin calls will lead to automatic closing of your positions. There are no margin calls when trading CFDs with thriveoptions but your position will automatically be closed when price reached the stop loss level.
Is Leveraged Trading Risky?
Even though you only put up a relatively small amount of capital to open a position (initial margin), your profit or loss is based on the full value of the position (Invested Amount * Leverage). So the amount you gain or lose might seem very high in relation to the sum you’ve invested. However, it should always be kept in mind that leverage not only magnifies your potential profits but also your potential losses. Additional information about the maximum loss or gain from each position can be found below.
Trading Profit and Loss Calculation:
Pip value: is an important component of the P&L calculation and will be given to you by the platform prior to opening your position.
Pip value for Forex (other than JPY) = (invested amount * Leverage) / open price / 10,000
Pip value for Forex where JPY is the quoted currency = (invested amount * Leverage) / open price / 10,000
Pip value for Equities and Commodities = (invested amount * Leverage) / open price / 100
Note that the pip value given by the platform is the base currency of your account.
Profit and Loss Formula = (pips movement * pip value) – swap charges
You can set pending/future orders for entering into a position when the actual price will reach your target/set price. Buy Limit: an order to buy at a specific price that is lower than the current one. Sell Limit: an order to sell at a specific price that is higher than the current one.
Note that there are restrictions of how close your pending order price could be from the current price
Take profit: is a pending order at a predetermined price to exit a profit making position.
You can set or change your take profit price (or amount) at the start or/and during the period of your position. We recommend to check the take profit price prior to opening a position.
Note that there is a limit on the range between the open price and the take profit price.
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