I’ve read and reread this topic and the calculations several times and it’s still not going in. Just after a dummies guide explanation with an example.
I understand how leverage works on CFDs in that you can open a position by depositing the percentage of the full value. But I am confused as to how the risk or potential loss works.
I.E. (ignoring currency conversions, so presuming all in £)
I have an account of £100 and open a position on x1 Gold at £1000 but as gold has 5% margin I only put down £50.
The price goes up to £1025 and I sell, so I make £25. and my balance is £125 now?
The price goes down to £975 and I sell, I lose £25 so my balance is £75 now?
The price goes down to £200 and I sell, I lose £800 so my balance is -£700 now?
In theory though with number 3 as Gold drops, so will my Margin Indicator and when that gets to 25% Trading 212 will close the position automatically? Does this mean my account would never be negative and owing money?