A CFDs (Contract for Difference) is a leveraged derivative financial instrument. When you trade CFDs, you basically take a position on the change-in-value of the underlying asset over time. CFDs are derivatives because their value is derived from the value of another asset (such as a stock, commodity, index or currency). CFDs do not have an expiry date like binary options and they can only be closed by making a reverse trade.
A BUY position is the act of buying an underlying asset, such as a stock, with the expectation that it will rise in value.
Conversely to a BUY position, a SELL position is the act of selling an underlying asset, such as a stock, with the expectation that it will drop in value.
A pip (Point in Percentage) is considered the smallest price change that a given exchange rate can create. Generally speaking, it is the term used to describe the smallest incremental move of an exchange rate in the currency market. Depending on the context, one basis point equals 0.0001 (in assets such as EUR/USD, GBP/USD, USD/CHF, and 0.1 in assets such as USD/JPY.)
Spread is the difference between the bid price and the ask price of an underlying financial asset. In other words, it is considered as the difference between the price at which you can sell the trading asset and the price at which you can buy the trading asset.
Leverage is considered as the use of ‘borrowed money’ to magnify any profit (financial leverage.) In other words, it is the ability to hold an investment position of greater value than that of your total equity (collateral.) When leveraging your investment, you only need to deposit a small fraction of the actual value of the position you are holding.
For all CFDs (forex, stocks, commodities and indices), the initial margin is the minimum available amount that’s required in order to open a trading position. It is calculated by multiplying initial position value by initial margin instrument %.
The minimum amount that an investor must have available in their account in order to keep it open, or maintain a specific trading position. It is calculated by multiplying the initial position value by asset maintenance margin %. In other words, the maintenance margin requirement is considered as the minimum amount to be collateralized in order to keep a position open. Click here to learn more.
A trader receives a margin call from his broker if one or more of the securities he had bought decreased in value past a certain point. The most common causes of a margin call are the use of excessive leverage with inadequate capital while holding on to losing trades for too long instead of closing them. When this occurs, you no longer have the funds in your account to hold the position/s and need to either close them or add funds to your account.
A stop-loss order is an order that closes out your trading position with the intent of cutting down your losses when the market moves in the opposite direction of your trade. Placing stop-loss orders solely depends on your trading strategy. For instance, if the market suddenly breaks the trend that you are trading and moves far enough in the opposite direction, your account will be protected from unwanted losses.
A take-profit order is an order that specifies the exact rate or number of pips from the current price point that is required to close out your current position for a profit. Take-profit orders are used to lock in profits in the event that the rate moves in the same direction of your opened trade.
An entry order acts like a conditional order to buy or sell at predetermined a price (other than the current price).
A bid price represents the maximum price that a buyer or a group of buyers are willing to pay for an underlying financial asset. In other words, it is considered as a price quotation that indicates the best price at which an underlying financial asset can be sold.
An ask price represents the minimum price that a seller or a group of sellers are willing to receive for an underlying financial asset. In other words, it is considered as a price quotation that indicates the best price at which an underlying financial asset can be bought.
CFD trading with SeguroFX doesn’t require any previous financial experience or background. All you need is a computer or a mobile device and an internet connection.
The maximum leverage that is offered for CFDs trading at SeguroFX is 1:200 and it’s available on selected assets and for selected account types.
A strike price, also called the “exercise price”, is the rate at which the underlying asset is exchanged, the moment a CFD position is executed.
The returns on successful investments vary and are based on the movement of the market, margin amount, leverage ratio, selected asset, investment amount and the position’s duration.
