CFD Position: Vital Information

Just as in any other form of trading, you open a CFD position on the basis of whether you expect the price to move up or fall. Whereas in other forms of trading you buy when you have the capacity to pay the full price and sell only if you already own a product, you can open a buy or sell CFD position simply by meeting the margin requirement applicable to the CFD position. 

A CFD position may be opened with a buy order or a sell order. However, if you close a CFD position, it must be equal and opposite of the open order. Multiple open CFD positions can be closed with one single order.

The most important aspect of opening a CFD position is margin money that you are required to pay. Since you do not pay full contract value, the CFD provider requires you to pay a percentage as security to its exposure to the risk as the counterparty to the contract.

Margin requirements tend to vary and depend upon two major factors:

-          Market volatility: There can be extremely sharp price movements in times of volatility, which increases the product provider’s risk to a CFD position.

-          Internal risk management: Every CFD provider has a risk management policy. The basis of such policies is usually its overall risk exposure taking into account the sum of all CFD positions opened with it.

Margin requirements are at the sole discretion of the product provider and tend to vary. Regardless of the margin money you pay on the CFD position you open, you need to be always prepared to pay the total contract value of your CFD position/s. Failure to meet margin requirements or full contract value in periods of very high volatility may mean termination of your CFD position/s.