Phase 08 // Course Syllabus Chapter
CFD Mechanics: Leverage, Margin & Financing Costs.
Part of our masterclass path. We systematically cover risk, logic, and mechanics to build professional edge.
Edge Tier Access 20 min read / 12 min video
01_Curriculum_Brief
What is covered in this chapter
Understanding Derivative Leverage
Contracts for Difference (CFDs) are financial derivatives that allow traders to speculate on the price movement of asset classes without owning the underlying asset.
Key Concept: Leverage multiplies both gains and losses. A 1:30 leverage ratio means that for every £1,000 of position size, you only need to put up £33.33 of margin. However, a small price movement of just 3.3% against you will wipe out your margin entirely.
CFD Overhead Costs
CFD trading carries structural costs that you must calculate into your trading setups:
- Spread: The difference between the buy (ask) and sell (bid) price quoted by your broker.
- Commissions: Fixed charges per lot (primarily on equity CFDs).
- Overnight Financing (Swap): The cost of borrowing funds to maintain a leveraged position overnight, determined by interbank interest rates.
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Phase 08 Chapters
01CFD Mechanics: Leverage, Margin & Financing Costs02CFDs vs. Spread Betting vs. Direct Share Ownership03Introduction to Options: Puts, Calls & Risk Profiles04Understanding Option Greeks: Delta, Theta, and Vega05Hedging Strategies: Protecting Capital in Adverse Conditions06Choosing the Right Product for Your Account Size