{"id":334,"date":"2021-08-08T19:15:25","date_gmt":"2021-08-08T17:15:25","guid":{"rendered":"https:\/\/cfd-trading-blog.com\/?p=334"},"modified":"2021-10-23T14:11:44","modified_gmt":"2021-10-23T12:11:44","slug":"cfd-trading-mit-hebel-wie-funktioniert-es","status":"publish","type":"post","link":"https:\/\/cfd-trading-blog.com\/en\/cfd-education\/cfd-trading-with-leverage-how-does-it-work\/","title":{"rendered":"CFD trading with leverage - How does it work?"},"content":{"rendered":"
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CFD trading refers to trading in CFDs (or contracts for difference). These belong to the derivative financial instruments and reflect the mutual performance of two investment parties or a single asset. The underlying asset is therefore not purchased directly in CFD trading, but speculated on its price trend.<\/p>

The potential investor can either realize the CFD trade completely with equity capital or he can use borrowed capital for a short time - a so-called CFD leverage. This is short-term borrowed capital, through which larger shares of CFDs can be acquired for trading than would be possible only with their own funds. For this, the potential trader must deposit a margin - an interest payment for the entire term of the trade.<\/p>

Leveraged CFD trading offers itself to many investors as a lucrative business model, which is also associated with high risks, since a total loss is possible at any time. In the following sections, the reader will learn all the information about CFD leverage, what can be traded leveraged, individual risk management and how to learn leveraged CFD trading on the demo account.<\/p>

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How CFD trading with leverage works<\/strong><\/h2>

First, the trader decides on an individual leverage - for example 1:2, 1:5 or 1:10. The number with which the \"1\" is set in relation describes the amount of borrowed capital taken up for the trade with the broker. If, for example, 1,000 euros of equity is traded and a leverage of 1:10 is used, the trader trades briefly with 10,000 euros. For this, however, he must deposit a margin with the broker.<\/p>

The amount of the margin depends on the leverage and usually varies between 3 and 50 percent. This amount is then blocked on the trader's own securities account during the trade and cannot be used for parallel trades. As soon as the trader liquidates his leveraged position again, he gets his margin back from the broker, minus or in addition to the profit achieved.<\/p>

The danger of leveraged CFD trading: The borrowed capital for the trade and the deposited margin naturally bear the risk of total loss at any time. A total loss means that the trader has used up the margin deposited with the CFD broker. If the trader does not close any other CFD positions or does not add any money, the CFD broker automatically closes the CFD.<\/p>

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What is leverage anyway?<\/strong><\/h2>

In the financial industry, leverage is a proven means of achieving high profits with relatively small amounts of equity. As a rule, a fraction of the leverage amount must be deposited as collateral (or \"margin\"). The trader can now buy a much larger volume of CFDs with the larger volume of money (margin + leverage), which offers these significantly higher profits, but just also greater losses.<\/p>

In short, leverage is a kind of \"short-term loan\" for CFD traders to increase their invested capital.<\/p>

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These markets can be traded with leverage<\/strong><\/h2>

There are numerous trading classes on the financial market that can be traded leveraged. In addition to pure CFD trading, this also applies to the following assets, among others. According to new EU regulations, there are clearly defined standard levers for the asset classes:<\/p>