Margin Deposit Definition – What is Margin Deposit? | CFI

margin deposit

The margin deposit is also known as the initial margin, deposit margin or simply the deposit. if you trade forex, equities, commodities, or indices with a broker using leverage or 'on margin', it means you are ultimately borrowing money as you will be using [leverage] on your trades. to start borrowing that money, you need to put down a deposit.

 

When you start trading on margin, you only deposit a percentage of the full amount you wish to trade, starting from 0.25%, 0.5%, 1%, 2%, and so on. for example, if the leverage offered for a specific instrument you wish to trade on is 20:1, the margin that you will need to invest is 5% of your trade size. the value of the full position would be 20 times the value of the deposit required to open the trade.

 

The key thing to remember when trading margined products is that leverage can increase your profit, but it works the same the other way around as well, so losses will be amplified.

 

Margin calculators will quickly compute the margin percentage, the required margin, and the amount you need to maintain a trading position, depending on the contract size, accounting currency, and the financial assets you are trading.

 

Example of a margin deposit

For example, at cfi the leverage available for retail clients on equity cfds is 1:10 meaning you only need to have 10% of the value of a position (the margin deposit) before entering it. this allows you to control a larger position with a smaller amount of money.

 

key takeaways

  • Trading on margin allows you to control a larger position with a smaller amount of money
  • Calculate the margin required by your broker in advance because every broker is different
  • Trading on margin, i.e. with leverage can increase your profit, but losses will be amplified as well
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Important Disclaimer:


We would like to remind that while we endeavour to provide best possible services, CFI provides execution only services and any information, reports, opinions, commentary or other materials he receives from CFI directly or from its employees or through any analytical tools provided to him or third party research provided to him from the Company shall not be deemed as investment advice and it cannot be relied upon to make investment decisions. The Client commits to make his own research and from external sources as well to make any investment. The Client accepts that CFI will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. The contents of any report provided should not be construed as an express or implied promise, as a guarantee or implication that clients will profit from the strategies herein, or as a guarantee that losses in connection therewith can, or will be limited.


Forex and CFDs are leveraged products that incur a high level of risk and a small adverse market movement may expose the client to lose the entire invested capital. The vast majority of retail client accounts lose money when trading in CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. The possibility exists that you could sustain a loss in excess of your deposited funds even if a stop loss is used and therefore, you should not speculate with capital that you cannot afford to lose and be aware of trading risks. Credit Financier Invest (Mauritius) Ltd provides general information that does not take into account your objectives, financial situation or needs. The content of this website must not be interpreted as personal advice. Please ensure that you understand the risks involved and seek independent advice if necessary.

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