We are happy to announce that we have increased the leverage on all our Stock CFDs up to 1:20.
This is because one of the main issues that all investors face in trading shares of equities is that in order to make more money you need to have enough capital to purchase shares. Fortunately, there is an excellent tool that allows investors to significantly minimize the initial capital while speculating on the direction of a security without actual purchase or short-sale of that security. This tool is called contracts for differences or CFDs.
CFDs are a leveraged product, which means that you only need to deposit a small percentage of the full value of the trade in order to open a position. With CFDs trading, you don't need to buy or sell a physical share or any other underlying asset. You just buy or sell a number of units for that particular instrument depending on whether you think its price will go up or down.
CFDs are fast growing in popularity among MTrading investors as a profitable alternative to traditional share trading, since the company is now offering an opportunity to use up to 1:20 leverage ratio on the investment capital. So, why CFDs at this ratio are so popular at MTrading?
Suppose that the shares of Apple Inc. (AAPL) trade at $170 per share. If you were to buy 1,000 physical shares of AAPL at this price, then it would cost you $170,000, as one has to pay the full value of those shares.
But, using 1:20 leverage on CFDs trading gives you an exposure to the same number of AAPL shares contributing only 5% of the total purchase price as a margin on your trading account. This means that the total amount needed in your account for 1,000 CFDs is $8,500 ($8,50 x 1,000 CFDs), because you have to put only $8,50 per each Apple Inc. CFD as margin on your trading account.
If the price of AAPL moves to $171 per share and you decide to sell your contract of 1,000 AAPL CFDs at this price you make a profit of $1,000 (1,000 CFDs x $1). Thus, in CFDs trading with 1:20 leverage ratio you can make as much profit with an investment of $8,500 as you would have made with $170,000 if you were to buy the shares!
Of course, leverage is not the only advantage of CFDs trading. This tool also allows you to trade on the price of a product going down as well as up, so you can try and benefit from selling as well as buying opportunities. In addition, many investors and traders use CFDs as a way of hedging their existing portfolios through periods of short-term volatility.
In order to explore full advantages of the increased leverage on Stock CFDs to 1:20, you may use our free MTrading demo account and then apply your acquired skills on your actual trading account!