CFD margin calls

Hi,
New to this platform and CFD.

I used to trade on another platform where if Stop losses weren’t set you weren’t in risk of loosing more money than what in your online account…

Is this the case of Trading212 too ? Or will a stop loss save me from a flash crash ?

Is leverage set and fixed for stocks ?

Thanks.

You can’t lose more money than than what is in your account because you will be margin called when your your account status drops below 45% to add more funds.
Trading212 will close your positions on first in first out basis when your account status drops below 25% .

Leverage on stocks is 20% for retail clients but varies for professional accounts check the trading instruments page or view within the app to be sure.

Can you make me an example with say an account funded with 1000£ ?

Also what does 20% translate to ? in terms of floating point number of leverage ? 5x ?

Will I get a chance to fund my account more when reaching 20% or will they liquidate my positions ?

20% margin is 1:5 leverage.

You will get a chance to fund your account.

  • When the account status drops below 45%, you will receive an email with a “low margin” warning.
  • When the account status drops below 25%, your positions will start closing following the order of their opening to prevent a loss exceeding your deposited funds.

See: https://www.trading212.com/en/Frequently-asked-questions?cId=4

Sorry I promise I’ll get there can you help with an example on the virtual CFD platform ?

US30 under Indices. It’s 5% Margin so 20x leverage.

If I go long, I get the order window and if I type 1 I get in 43.22 (US30 at 21601 at the time when I was in front of that window)

What is the math behind that 43.22 ? Is it my margin ? I’d like to know the value of my position, how do I get there ?

Also in that window it says swap is 1.80$ ? What is that ?

Okay I will try to help.

1 share = ~21601 1 share GBP = 17574.25 @0.81
Retail margin (5%) should have been around £878
Professional margin (0.33%) would have been around £58
Not sure where 43.22 came from maybe take a screenshot and post.

Swap is interest that is charged daily for holding a cfd overnight.

I changed the currency to USD to try to make sense of

it…

Okay I get it now my bad.

The professional margin for US 30 is 0.2% (i was looking at us30 mini before)

The required margin $21259 * 0.2% = $42.52 (The discrepancy will be due to the share price changing rapidly)

I would suggest in settings->Trading preferences you select “Simulate retail account” to give you a more realistic idea

That makes sense. So the value of my position would be Margin * Quantity right ?

The value of the position would be quantity * current price.

If you want to make it unnecessarily complicated the value would also be approximately margin * Leverage

Thanks I’m trying to port what I know about shorting in another platform here… building a spreadsheet soon. Thanks Mitch, really appreciated.

Ok, another thing I don’t understand… what are the margin levels when trading ?

I can open a position using all my funds and the “status” shows 50%… which I guess it’s the margin level… but surely it’s not the margin level ?

Am I doing this right ?

Equity = Trade Balance + Profit/Loss
Margin Level = (Equity ÷ Used Margin)×100

It doesn’t make sense as the result of the screenshot below is a 126% margin level more or level…am I looking at this from the wrong angle ? I would expect the margin to be really low when the used margin is almost equal to my funds.

My virtual account

@dropbrick This is how we calculate margin:

  1. Over 50% -> [Total funds / (Total Funds + Blocked funds)] x 100%
  2. Under 50% -> (Total funds / Blocked funds) x 50%
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Is number 1. [Total funds at position opening / (Account Value + Blocked Funds}] x 100 ?

because looking at the numbers that would make sense to me.

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Can you please make me an example with numbers so I can verify my math ?
Say account with 50k, going long on 10 BTC and one with going short 10 BTC.

I’d like you to point out at which price I get margin called and at which price I get liquidated. So I can verify my math.

Thanks!

@dropbrick There are simpler ways to think about this. As a general rule of thumb, if you have $1,000 in your account & you’ve invested all of the $1,000, your margin bar is exactly at 50%. If your account balance should drop to 50% of the invested funds ($1,000 margin), then you’d get stopped out.

You have 50K, you buy 10 BTC at $7k with 1:2 leverage. Thus, you’re gonna need 10 x 7,000 / 2 in margin = 35K.

Going by the over 50% formula -> [50K / (50K +35K)] x 100 = approx. 58%

To receive a margin call, the margin indicator needs to hit 50%. Going by what I initially said, that happens when your total funds are equal to your margin (invested funds). In this case, since you’ve invested 35K, you’d need to lose 15K for the margin bar to hit 50%.

E.g. [35K / (35K +35K)] x 100 = 50%
To lose 15K when you have 10 BTC, you’d need BTC to move 1,500.

To get stopped out, your total funds must drop to 50% of your margin / invested funds which are 35K.
35K / 2 = 17.5K
Thus, from the starting point of 50K, you’d need to lose 50K - 17.5K in order to get stopped out.
That would be a loss of 32.5K. Let’s see if we got it right.

Under 50% -> (Total funds / Blocked funds) x 50%
(17.5K / 35K) X 50 = 0.5 x 50 = 25%

For you to lose 32.5K with 10 BTC, it’d have to move by -> 32.5K / 10 = 3,250
Initial opening price 7K - 3,250 = 3,750 - it’s as simple as that.

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Thanks!

Another quick one… am I at risk of my losses being bigger than my funds ? Meaning when I reach bottom I get liquidated and I don’t lose more money that what I have in the CFD account ?

@dropbrick If you’re a retail client, you have negative balance protection, there’s no way you could lose even a penny more than you have.

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And that means the CFD account only right ? If I have an ISA they are segregated correct ?

@dropbrick Absolutely.