Here we have compiled a list of commonly used terms in CFD trading
 

Leverage:

Leverage increases your purchasing power hence enables you to gain a large
exposure to a financial market while only tying up a relatively small amount of
your capital.

CFDs are leveraged, which means you only have to put down a small deposit for
much larger exposure.

Leverage increases your profit potential and the risk of losing your capital.

WorldTradeCenter CFDs have static leverage that depends on the Asset you’re
trading.

 

Margin:

When trading on leverage, you must maintain a certain level of funds in your
account (the necessary margin), also known as a good faith deposit. Calculating
and understanding your necessary margin requirements beforehand allows you to
apply good risk management and avoid any unnecessary margin calls resulting in
the closing of a position due to not enough margin in your account.

The margin of WorldTradeCenter’s trading platforms will be the invested amount
you select prior to opening the position.

 

Margin Call:

Margin Call refers to the situation where the broker asks for additional funds
to cover losses from your loss-making positions. Failure to meet margin calls
will lead to the automatic closing of your positions.

There are no margin calls when trading CFDs with WorldTradeCenter but your
position will automatically be closed when the price reached the stop loss
level.

 

Is Leveraged Trading Risky?

Even though you only put up a relatively small amount of capital to open a
position (initial margin), your profit or loss is based on the full value of
the position (Invested Amount * Leverage). So the amount you gain or lose might
seem very high in relation to the sum you’ve invested. However, it should
always be kept in mind that leverage not only magnifies your potential profits
but also your potential losses. Additional information about the maximum loss
or gain from each position can be found below.

 

Trading Profit and Loss Calculation:

Pip value: is an important component
of the P&L calculation and will be given to you by the platform prior to
opening your position.

Formulas:

Pip value for currencies (other than JPY) = (invested amount * Leverage) / open
price / 10,000

Pip value for currencies where JPY is the quoted currency = (invested amount *
Leverage) / open price / 10,000

Pip value for Equities and Commodities = (invested amount * Leverage) / open
price / 100

Note that the pip value given by the platform is the base currency of your
account.

 Profit and Loss Formula = (pips movement * pip value) – swap charges

 

Pending Orders:

You can set pending/future orders for entering into a position when the actual
price will reach your target/set price.

Buy Limit: an order to buy at a specific price that is lower than the current
one.

Sell Limit: an order to sell at a
specific price that is higher than the current one.

Note that there are restrictions of how close your pending order price could be
to the current price

 

Take profit: is a pending order at a
predetermined price to exit a profit-making position.

You can set or change your take profit price (or amount) at the start or/and
during the period of your position.

We recommend checking the take profit price prior to opening a position.

Note that there is a limit on the range between the open price and the take
profit price.

Example:

You open a SELL position on EURUSD at 1.1208 with an invested amount of 100 EUR.

The pip value will be 3.5688 EUR and the take profit will automatically be set
at 1.118 so if the price reached the take profit you will win 100 EUR (3.5688 *
28pips ≈ 100 EUR).

If you wish to decrease the take profit level further at 1.11 then the
potential gain of your position will increase to (3.5688 * 108) 385.4 EUR.

 

Stop loss: is a pending order at a
predetermined price to exit a loss-making position.

You can set or change your take stop-loss price (or amount) at the start or/and
during the period of your position.

We recommend checking the stop-loss price prior to opening a position.

If you change the initial stop loss level your invested amount (margin) will
change also but the pip value will remain the same.

Note that there is a limit on the range between the open price and the
stop-loss price.

Example:

You open a SELL position on EURUSD at 1.1208 with an invested amount of 100 EUR.

The pip value will be 3.5688 EUR and the stop loss will automatically be set at
1.1236 so if the price reached the stop loss you will only lose your invested
amount (3.5688 * 28pips ≈ 100 EUR).

If you wish to increase the stop loss further at 1.1250 then the risk of your
position will increase to (3.5688 * 42) 150 EUR meaning that your invested
amount (margin) will automatically go to 150 EUR.

Close Manually: you can close your
open positions manually by pressing the close button on the right side of your
open trades section.

 

Trading Costs:

Spread is the difference between the
bid (sell) and ask (buy) price. The difference is presented in pips and
reflects the cost of opening a position.

The related cost will be spread * pip value.

 
Swap is the interest deducted from
the Profit/Loss of your position and is only charged when a position is held
open overnight.

Swap charge formula: swap rate * lot
size * the number of days.