Margin and leverage
- What is margin and leverage?
- What is the margin level for each market?
- Margin requirements for large trade sizes
- Order-aware margining
- Margins for hedging
- What is a margin close out?
- Margin close out levels
1. What is margin and leverage?
Margin is the amount of money you need to deposit with us in order to place a trade and maintain that position. When you place the trade you must have enough net equity (cash and unrealised profit & loss) in your account to pay the margin requirement for that trade and the commission (if applicable) and/or any charges including the spread. Margin is not a fee; it is deducted from your account and returned when the position is closed.
2. What is the margin level for each market?
Our margin requirements differ according to market, asset class and position size. You can find out the specific margin of each instrument in the market information sheet on your platform.
To calculate the amount of funds required to cover the margin requirement when you open a spread bet, simply multiply the total notional value of your trade (stake x price of instrument) by the margin factor.
To read up more about how margin works, please visit our education section.
With City Index's Advantage Trader platforms, you can calculate your margin before placing a trade through the platform's margin calculator, monitor each position's margin requirement separately or review your account's total margin requirement through the "margin level indicator".
3. Margin requirements for large trade sizes
The larger the trade size, the higher the risk level associated with the trade. Therefore we may increase our margin requirements for larger size trades or any additional trades in that instrument. To do this, City Index increases the size of the margin requirement at specific levels, known as 'step margin levels'.
For example, in Company ABC
|Spread bet stake size||CFD stake size||Margin|
If you were to place a trade in company ABC at £5 per point, you would be charged an initial margin of 5%. If you were to place an additional buy spread bet of £12 per point in the same market, your total stake size in that market would now be £17 per point.
This means that, for your total spread bet position in this market, the first £10 per point is charged at the initial step margin of 5%. The remaining £7 per point is charged at the second step margin of 10%.
Step margins are only present on CFD and Spread Bet markets.
4. Order-aware margining
Some CFD or Spread Bet markets benefit from orders-aware margining, which means that placing a stop loss order on an open position will reduce the margin required to maintain that position. Information on whether a market includes orders aware margining can be found within the market information sheet, however this can only be utilised on the first initial step margin
When placing a stop, the margin requirement is calculated based on the distance the stop is away from the current price, and you can use the margin calculator in platform to view the margin that is applicable for the trade you wish to set up.
5. Margins for hedging
Hedging margins are set to the 'longest leg' whereby you will be charged margin for the longer portion of the hedge trade, and nothing for the shorter leg.
For example, you are trading CFDs and have two open Wall Street positions, originally selling a quantity of 10 and then buying a quantity of 5. In this case, you would only be charged margin for the original, larger side of the trade, the Wall Street short 10 position. Assuming that the margin for selling 10 Wall Street is £1,691.45 and the margin for buying 5 Wall Street is 845.7, you would only need to provide enough margin to cover the original, larger sell position for both of the trades in this market.
6. What is a margin close out?
If your margin level is at or below the margin close out (MCO) level, we may have to close any or all of your open positions as quickly as possible; this is to protect you from possibly incurring further losses. We strongly recommend that you monitor your margin level carefully, as you should not expect to receive a margin call or warning prior to closure. The Margin Level Indicator on the trading platform makes monitoring your margin level very easy.
The calculation for the margin indicator is determined by the Net Equity in your account divided by your Total Margin Requirement. To improve your margin indicator do one or more of the following:
- Deposit funds,
- Close or part close positions,
- Add an orders aware stop loss.
7. Margin close out levels
Margin close out levels vary by account type. If your account offers shares, then your MCO will be 50% of your entire margin requirement. If it does not offer shares your MCO will be 100%. If you drop below your margin requirements, all your open positions will be closed in order to protect you from incurring further losses.
In MT4 accounts, MCOs close out the largest positions first, followed by the next largest, and so on until the account has a minimum of 100% margin again.
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