Leverage and Margin

Leverage

Unlike traditional dealing, CFD trading enables you to trade the markets by paying just a small fraction of the total trade value.
In conventional dealing, you would have to pay your broker the total value of the shares you wish to purchase. With CFD trading, however, you only have to deposit a small percentage of the total trade value whilst maintaining the same level of exposure.
Leverage of “10%” (or 1:10) means that if the price of the underlying asset changes by 1% the price of the CFD will change by 10%.
For example: You deposit $1,000 and your Equity is $1,000 and the leverage offered is 1:100. Your leveraged amount is $1,000 x 100 = $100,000.
Leverage is a technique used to multiply gains; however leverage can also multiply losses.

Margin Call

Your Margin is monitored in real time, providing you with the benefit of knowing where you stand at all times.
The maintenance margin level is the minimum amount of equity you need to maintain an open position. Should your equity fall below the minimum amount, then, X90 will automatically execute a margin call trade and close any open positions until your account equity exceeds the maintenance margin level requirement.

Example of a Margin Call:
You signed up and deposited $1,000 via credit card.

  • Balance: $1,000 (Deposits - Withdraws + P&L of closed positions)
  • Available Balance: $1,000 (Balance + P&L of open positions - Initial Margins)
  • P&L = $0 (total profit and loss of all open positions including daily premiums)
  • Equity: $1,000 (Balance + P&L of open positions)

10.30am - you buy 10 Microsoft Shares (CFDs) at $50.00
The total amount you bought is: 100 * $50.00 = $5,000

The Margin that is needed for 100 Microsoft Shares is 10%: $500
If your equity falls below $250 you will get a Margin Call.X90 will liquidate your open positions.

  • Balance: $1,000.
  • Available Balance after you bought the Microsoft shares is: $500 ($1,000 - 10%*$5,000)
  • P&L = $0
  • Equity: $1,000 ($1,000 + $0)

11.15pm – Microsoft shares fall to $45

  • Balance: $1,000
  • Available Balance: $0 ($1,000 - 10%*$5,000 + 100*($50-$45))
  • P&L = -$500 (100*$50 - 100*$45)
  • 'Equity' is $500 (-$500 + $1,000)

1.10pm – Microsoft shares fall to $42. You get a Margin Call and X90 liquidates your position.

  • Balance: $1,000
  • Available Balance: $0 ($1,000 - 10%*$5,000 + 100*($42-$50))
  • P&L = -$800 (100*$42 - 100*$50)
  • Equity: $200 (-$800 + $1,000)

The reason you get a Margin Call is because your Equity is $200 and you need $250 to maintain an open position on 100 Microsoft Shares. Therefore, X90 has liquidated your position.

Your current balance is:

  • Balance: $200 (Balance changes only when closing a position or withdrawing funds).
  • Available Balance: $200 (Deposits - Withdraws + P&L of closed positions)
  • P&L = $0 (no open positions)
  • Equity: $200 (Balance + P&L of open positions)

Margin

In order to open a new position, available account equity must exceed Initial Margin Level requirement. The Initial Margin Level requirement is specific to each financial instrument.
To see the Initial Margin Level for a specific instrument go to the main screen of X90 trading platform, select the instrument you wish to view and click on ‘Details’. A popup box will appear and the Initial Margin Level in shown in the top right hand corner of the box.
Margin is monitored real-time and an email will be sent once the margin required becomes greater than 40% of equity.

Safety Measure

Should additional margin not be provided, as a safety measure, positions will be closed to prevent customers from becoming indebted.