The margin when trading CFDs is the amount a trader needs to have in their trading account as they do not need to put up the whole fraction of the total position to open a trade. The margin may differ from 3% to 10% depending on the CFD that the trader trades. Index, Sector CFDs margin and FX trades involves only 1% margin.
Financial costs and benefits
When a trader opens a CFD trade on a margin, the CFD provider is lending the rest of the amount to the trader. Financing costs are different between CFD providers, thus it is important to check before signing up with a broker. Traders have to bear in mind that financing costs are due for payment if a CFD position is long but if a CFD position is short, interest will be paid to traders. in the case were the CFD trade is short, the trader is lending money to the CFD provider and thus interest is to be paid to the trader.
Trading CFDs have the advantages of paying lower commission fees to brokers compared to what a trader would pay to stock brokers. CFD providers may allege as low as $10 commission fee for up to $10.000 trades, were stock brokers charge at least $30 for a trade.
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