The worldwide traders use CFD for its leverage feature. Financial leverage is an investment strategy allowing people to evolve in financial markets with margin. The leverage trading allows traders to make the capital work harder to achieve a high equity return.
Terms about leverage trading
- Buying power: it is the amount available for borrowing securities.
- Coverage: it is the ratio of net balance in the trading account to the leverage amount.
- Margin: it is the amount that the broker requires to cover the losses.
- Margin calls: the broker issues a margin call if the trading account balance falls below the minimum requirement.
- Open position: it means the trade is not closing with the opposing trading after opening it.
- Close position: it means the investment value of an individual at the closing time.
- Stop-loss: it helps to limit the risk exposure by closing the position of the trade automatically.
Leveraged trading is risky as people can lose more than they invest. Therefore, it is necessary to use the right platform for trading. Professional traders choose the high leverages markets over the non-leveraged ones every time. People should never trade the stock without using leverage.