Defining Leverage

Trading with Leverage is the ability to trade a position larger than the amount of money in your account. Leverage is expressed as a ratio, for example 50:1 or 500:1.

Assume that you have an account with $10,000. You trade ticket sizes of 5,000,000 USD/JPY. This equates to a leverage of 500:1. How can you trade 500 times the amount of money you have at your disposal?

The answer is that when you trade on margin you are using a free short-term credit allowance from CD Captials This short-term credit allowance is used to purchase an amount of currency that greatly exceeds your account value. Without margin, you would only be able to buy or sell tickets of $10,000 at a time.

Defining Margin

Margin serves as collateral to cover any losses that you might incur. Since nothing is actually being purchased or sold for delivery, the only requirement, and indeed the only real purpose for having funds in your FX account, is for sufficient margin.

Margin is expressed as a percentage of position size, for example 5% or 1%. On a 1% margin, a position of USD 1,000,000 requires a deposit of USD 10,000.

Risk Warning: Leverage allows you to potentially make large profits from a relatively small initial investment. However without proper risk management it can dramatically amplify your losses. The leverage capacity CD Captials offers reflects our willingness to provide the traders with the level of risk they wish to adopt, we do not however recommend trading close to 500:1 leverage as this engages a large amount of risk. Ultimately the choice is left to the traders to make transactions that meet their risk tolerance.

Can I lose more money than I deposited?

No. Your maximum risk of loss is limited by the amount in your account.

Monitor your Margin:
Our trading platform has been designed to effectively allow you to control risk exposure in real time. This is achieved by monitoring your used and usable margin. Used Margin is the amount of money you need to put down as a deposit to hold your trade. Therefore, if your account is set to 100:1 leverage, you will need to set aside 1% of your trade size as margin.

Your Usable Margin is the amount of money left in your account that is available to open additional positions or to absorb any losses, and it fluctuates with your accounts Equity. Used Margin and Usable Margin added together, equal your Equity.

Margin Calls: Our Margin Call Policy guarantees that your maximum possible risk is your account equity. If the equity in your account drops to 100% of the margin required to maintain your open positions, you will receive a margin call. This is a warning that your equity is not enough to support your open positions. At this point you will have the option to deposit sufficient money in order to maintain your open positions.

As a service, CD Captials dealers will attempt to contact customers accustomed to dealing by telephone whose open positions reach margin call level. All customers are however fully responsible for monitoring the activity of their accounts.

The stop out level is the level of your equity where your open positions will be closed automatically. For Gold account holders the stop out level is below to 40%, Platinum account holders the stop out level is below to 35% of the margin required. For Diamond(pro) account holders the stop out level is below 30%. Please see our Client Trading Agreement for further details.