Can a CFD position wipe out your free funds?

Let’s say I have €100 on a CFD position, and also have €100 lying around in free funds on the CFD platform.

If the CFD position goes against me, will I lose the €100 invested in the position or the full account including the €100 free funds?

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In short it can wipe majority of free funds, if things go south.

Some details on CFD, I stay clear of them. :beer:

https://www.cmcmarkets.com/en/learn-cfd-trading/risks-of-cfds

You lose your investment multiplied by the margin. Hypothetically, if it is the only open position that you have, you will be left with 25 or less before the position gets closed.

My investment is only €100. But I have another €100 spare cash in free funds. What I’m asking is, can my spare cash get wiped out too?

In short, yes.

You can lose almost all your free cash.

Ok. Lesson learned (the easy way).

Thanks

To fellow noobs reading this: Take all free cash out of the CFD account if you have a position open with no stop loss.

Theoretically, if you’re selling short, I think your potential loss is infinite. Suppose you sell £100 of A at £10/share. If the price goes up, you lose money. So a move to £11 puts you £10 down. But there’s no limit to how high the price of A can go – it can go to £20 costing you £100 or to £1000 costing you £9900 or so on. Even with a stop loss, the price can jump overnight and you can be in big trouble.

Take it from someone who learned the hard way; you can lose all your free cash and even end up with a negative balance. So you can end up owing money. CFDs are quite complex and if you are new to it then it’s best to practise for at least a year before using your own money.

I thought a negative balance was impossible. Maybe with other platforms, but not T212.

It is unlikely with the measures put in place by T 212, but there are extreme cases that even T 212 cannot protect you from. Although this is rare it can happen especially when the change is so rapid even the algorithms may not trigger in time. I hope I’m wrong, maybe someone from the team can clarify this?

I guess my answer was invisible. Lol

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if t212 closes all positions when account hits 25% how can it wipe all funds out?

Example,

£100 buy drops to 25% = £25.00

£25.00 drops to 25% = £6.25

£6.25 drops to 25% = £1.56

If you have not opened any other trades or, even if you had another trade running simultaneously surely it would execute by the second or third figure so you would not go into a negative balance?

Hoping someone understands what I’m getting at lol

What would happen in the following situation i.e. would you owe Trading212:

You buy something and:

  1. You do not have a stop limit

  2. It drops 80% at the open but the amount in your account would only cover a 40% drop

A good example would be Wirecard.

You cannot owe money to a broker as a retail investor. This has been repeated several times.

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untrue I had to pay a negative balance fee

I wonder what were the circumstances were in your case. This FCA article says “We are requiring firms that offer CFDs and CFD-like options to retail consumers to: Provide protections that guarantee a client cannot lose more than the total funds in their trading account.

See also this statement from Trading 212 which says the same thing,

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yeah it does state this indeed but, my account somehow went completely empty and into the negative resulting in a deposit to cover negative balance

there are cases where you can end up purchasing more than your funds allow in which case you end up in an invisible negative balance that gets covered by part of your following deposit. but this would be due to market volatility in the invest accounts rather than CFDs.

T212 certainly provide the protection, so in most cases nothing happens but it is rarely possible to close ever so slightly in the negative if the market volatility was just that bad.

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So if you take a short position in CFD side and then transfer any free funds over to the invest account, will it try and take from there if you ballsup or is that safe? Is that deemed bad manners as T212 takes the hit, or a clever move?

Is that a loop hole, like doing market buys in invest/ISA when you can only never buy at a price more than you have funds available a bit like a limited market buy.

only money in your CFD account will be touched. its perfectly reasonable to protect your earnings by transferring them to your other account, however because it reduces the capital available in the CFD account you will find the risk that much larger in proportion.

free funds in CFD are always at risk and so they act as a safety buffer when the price fluctuates, as you have more money available to make good on a contract you have a greater leeway for the price to bounce around before you close the position. taking this money away is removing the buffer and now a small change in price can result in a margin call.

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