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لا تقدم سنشري للاستشارات والتحليل المالي ش.ذ.م.م (سنشري) خدمات استشارية استثمارية أو خدمات إدارة المحافظ ولا تضمن العوائد الاستثمارية. كما أننا لا نقبل ولا ندفع بعملة مشفرة أو عملة رقمية. موقعنا الإلكتروني الرسمي هو www.century.ae. احذر من الشركات المحتالة أو المواقع الإلكترونية التي تتظاهر بأنها شركة سنشري. لسنا مسؤولين عن أي خسائر تنجم عن استخدام مواقع إلكترونية أو كيانات مزيفة. ينطوي التداول في الأسواق المالية على مخاطر خسارة كبيرة قد تفوق الودائع وربما لا يناسب جميع المستثمرين. قبل أن تبدأ، يُرجى التأكد من فهمك التام للمخاطر ذات الصلة.

Why Trade On Margin?

Understanding Margin Trading: A Practical Guide

Margin trading can be a powerful tool for diversifying your portfolio and leveraging your exposure to financial markets. By using margin, traders can trade larger amounts with a smaller initial investment. Here’s how it works and what you need to know to get started.

What is Margin Trading?

Margin trading allows you to control larger positions in various markets—like indices, forex, cryptocurrencies, commodities, and stocks—by depositing just a fraction of the trade's full value. This initial deposit is called the margin requirement.

It’s important to remember that with margin trading, both profits and losses are calculated on the full value of the trade, not just your deposit. While margin trading can amplify your gains, it can also significantly increase your losses if the market moves against you. This is why it's crucial to thoroughly research the markets, build an effective strategy, and plan before you begin trading.

How Does Margin Trading Work?

When you buy on margin, your broker allows you to open a position by depositing only a percentage of its total value. For example, if the margin requirement for an instrument is 5% and you want to control a position worth $1,000, you’d only need to deposit $50. This leverage can potentially lead to substantial profits, but it also means that losses are calculated on the entire position value, which could wipe out your capital.

Similarly, when selling on margin, you can open a trade with a fraction of its full value, but any losses will still be based on the total value of the position. Margin trading is available across a wide range of asset classes, including currencies, commodities, indices, and shares.

Calculating Margin and ROI

Different brokers have varying margin rates depending on the instrument’s volatility—the more volatile the instrument, the higher the margin requirement. It's essential to ensure you have enough funds in your account to meet these margin requirements and keep your trades open.

Return on Investment (ROI) is another key calculation when trading on margin. ROI measures the efficiency of your investment by comparing the return against its cost. The formula is simple:

ROI = (Return on Investment / Cost of Investment) x 100

Key Points to Consider When Trading on Margin

  • Margin Requirements: You only need a deposit to open a position, but losses and gains are based on the full trade value.
  • Amplified Risks: Margin trading increases your buying power, but it also magnifies potential losses.
  • Risk Management: Use tools like stop-loss orders to protect yourself from significant losses.
  • Diversification: Margin trading can help you diversify your portfolio and hedge against risks.

Risks of Margin Trading

While margin trading can boost your potential returns, it also comes with significant risks. Market volatility can lead to large, unexpected losses, and if your account balance falls below the required margin, you might face a "margin call." In this case, your broker may require you to deposit additional funds, or they could close your position automatically—resulting in potential losses even on otherwise profitable trades.

If the market moves significantly against you, you could lose all your capital and still owe money. Therefore, it's crucial to trade with a regulated provider. For instance, Century Financial Consultancy is regulated by the Securities and Commodities Authority (SCA), ensuring a safer trading environment.

What You Don’t Own When CFD Trading

It’s important to note that with CFD (Contract for Difference) trading, you don’t own the underlying asset. This means the process differs from buying stocks, currencies, or commodities directly. For example, if you hold a CFD position on a company and it declares dividends, your account will be adjusted based on the dividend, but you won’t gain or lose from the dividend itself.

Benefits of Margin Trading

Margin trading allows you to maximize your market exposure without tying up all your capital in one transaction. This means you can use your remaining funds for other investments. While the potential for large gains is there, it’s equally important to consider the risks.

Using margin trading, you can diversify your portfolio by adding positions in assets that are negatively correlated with your current holdings. This can help offset losses in one area with gains in another, improving your portfolio’s overall performance.

Hedging Your Portfolio with Margin Trading

Margin trading also offers a way to hedge your existing positions. For example, if you have a long position in a stock or commodity and anticipate a short-term decline, you can use your margin account to short-sell the same asset. This helps protect your underlying position without closing it out.

Disclaimer: Century Financial Consultancy LLC (“CFC”) is Limited Liability Company incorporated under the Laws of UAE and is duly licensed and regulated by the Emirates Securities and Commodities Authority of UAE (SCA). This document is a marketing material and is for informational purposes only and must not be construed to be an advice to invest or otherwise in any investment or financial product. CFC does not guarantee as to adequacy, accuracy, completeness or reliability of any information or data contained herein and under no circumstances whatsoever none of such information or data be construed as an advice or trading strategy or recommendation to deal (Buy/Sell) in any investment or financial product. CFC is not responsible or liable for any result, gain or loss, based on this information, in whole or in part.

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By use of the publication and continuing to access the publication, you accept these terms and conditions and undertake to be bound by the acceptance. CFC reserves the right to amend, remove, or add to the publication and Disclaimer at any time without any prior notice to you. Such modifications shall be effective immediately. Accordingly, please continue to review this Disclaimer whenever accessing, or using the publication. Your access of, and use of the publication, after modifications to the Disclaimer will constitute your acceptance of the terms and conditions of use of the publication, as modified. If, at any time, you do not wish to accept the content of this Disclaimer, you may not access, or use the publication. Any terms and conditions proposed by you which are in addition to or which conflict with this Disclaimer are expressly rejected by CFC and shall be of no force or effect.

No information as given herein by CFC in this publication should be construed as an offer, recommendation or solicitation to purchase or dispose of any securities/financial instruments/products or to enter in any transaction or adopt any hedging, trading or investment strategy. Neither this publication nor anything contained herein shall form the basis of any contract or commitment whatsoever. Distribution of this publication does not oblige CFC to enter into any transaction.

The content of this publication should not be considered legal, regulatory, credit, tax or accounting advice. Anyone proposing to rely on or use the information contained in the publication should independently verify and check the accuracy, completeness, reliability and suitability of the information and should obtain independent and specific advice from appropriate professionals or experts regarding information contained in this publication. CFC cannot be held responsible for the impact of any transactional costs or any taxes as may be applicable on transactions.

Information contained herein is based on various sources, including but not limited to public information, annual reports and statistical data that CFC considers reliable. However, CFC makes no representation or warranty as to the accuracy or completeness of any report or statistical data made in or in connection with this publication and accepts no responsibility whatsoever for any loss or damage caused by any act or omission taken as a result of the information contained in this publication. The articles does not take into account the investment objectives, financial situations and specific needs of recipients. The recipient of this publication must make its own independent decisions regarding whether this communication and any securities or financial instruments mentioned herein, is appropriate in the light of its existing portfolio holdings and/or investment needs.

This document is a marketing material and has been prepared by individual(s), marketing and/or research personnel of CFC. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is purely a marketing communication. In this publication, any opinions, news, research, analysis, prices, or other information constitute is a general market commentary, and do not constitute the opinion or advice of CFC or any form of personal or investment advice. CFC neither endorses nor guarantees offerings of third party, nor is CFC responsible for the content, veracity or opinions of third-party speakers, presenters, participants or providers. CFC will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

Charts, graphs and related data or information provided in this publication are intended to serve for illustrative purposes only. The information contained in this publication is prepared as of a particular date and time and will not reflect subsequent changes in the market or changes in any other factors relevant to their determination. All statements as to future matters are not guaranteed to be accurate. CFC expressly disclaims any obligation to update or revise any forward-looking statements to reflect new information, events or circumstances after the date of this publication or to reflect the occurrence of unanticipated events.

Staff members/employees of CFC may provide/present oral or written market commentary or analysis to you that reflect opinions that are contrary to the opinions expressed in this research and may contain insights and reports that are inconsistent with the views expressed in this publication. Neither CFC nor any of its affiliates, group companies, directors, employees, agents or representatives assume any liability nor shall they be made liable for any damages whether direct, indirect, special or consequential including loss of revenue or profits that may arise from or in connection with the use of the information provided in this publication.

Information or data provided by means in this publication may have many inherent limitations, like module errors or lack accuracy in its historical data. Data included in the publication may rely on models that do not reflect or take into account all potentially significant factors such as market risk, liquidity risk, credit risk etc.

The use of our information, products and services should be on your own due diligence and you agree that CFC is not liable for any failure to achieve desired return on investment that is in any manner related to availing of services or products of CFC and use of our information, products and services. You acknowledge and agree that past investment performance is not indicative of the future performance results of any investment and that the information contained herein is not to be used as an indication for the future performance of any investment activity.

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Services offered by CFC include products that are traded on margin and can result in losses that exceed deposits. Before deciding to trade on margin products, you should consider your investment objectives, risk tolerance and your level of experience on these products. Trading with leverage carries significant risk of losses and as such margin products are not suitable for every investor and you should ensure that you understand the risks involved and should seek independent advice from professionals or experts if necessary.

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