In order to open a CFD (contract for difference) position on your account, you will need to deposit an amount of money known as margin.
The margin reflects a percentage of the full value of the position, and is referred to as 'position margin' on our platform. The position margin will be calculated using the applicable margin rates, as shown in the product library area on the platform. Read more about our CFD margin rates.
For shares, different margin rates may apply depending on the size of your position, or the tier your position (or a portion of your position) in that instrument falls within. The portion of the position that falls within each tier is subject to the margin rate applicable for that tier.
In order to calculate the position margin, the level 1 mid-price (shown on the platform) is used.
Company ABC (GBP) margin rates
Tier | Position size (units) | Margin rate |
|---|---|---|
1 | 0-1,000 | 20% |
2 | >1,000-3,000 | 25% |
3 | >3,000-5,000 | 30% |
4 | >5,000-10,000 | 40% |
5 | >10,000 | 50% |
The sum of: | Unit in Tier 1 x Tier 1 Margin rate | x level 1 mid-price |
|---|---|---|
Unit in Tier 2 x Tier 2 Margin rate | ||
Unit in Tier 3 x Tier 3 Margin rate | ||
Unit in Tier 4 x Tier 4 Margin rate | ||
Unit in Tier 5 x Tier 5 Margin rate |
Based on the margin rates in the table below for Company XYZ ($AU), if a position of 6500 units used the level 1 mid-price of $2.75, the margin would be $5,225.
Your position margin requirement is calculated as follows:
Tier | Position size | Margin rate | Calculation |
|---|---|---|---|
1 | 1,000 | 20% | 1,000 x 2.75 x 20% = $550 |
2 | 2,000 | 25% | 2,000 x 2.75 x 25% = $1,375 |
3 | 2,000 | 30% | 2,000 x 2.75 x 30% = $1,650 |
4 | 1,500 | 35% | 1,500 x 2.75 x 40% = $1,650 |
5 | 0 | 50% | 0 |
Total | 6,500 | Total = $3,437.50 |
The notional value of your total position is $17,875.00 ($6,500 x $2.75).
As you can see, margin trading allows you to open a position by depositing a percentage of the full value of the position. This means that your losses will be amplified and you could lose more than your initial deposit. Profits and losses are relative to the full value of your position.
Trading using margin is not necessarily for everyone, so you should ensure that you understand the risks of CFDs, and if necessary, seek independent professional advice before placing any trades.