Choosing appropriate leverage via CFDs

Discussion in 'Risk Management' started by TKshadow, Jul 17, 2019.

  1. TKshadow

    TKshadow

    This is my first post so apologies if the formatting is incorrect or it is in the wrong place.

    I'm looking to enter a couple of CFD positions.

    The issue I have is the initial margin on most positions is 20% i.e. 5X leverage. Is there a way I can reduce the leverage, to say, 2X. I'd then look to scale if the position goes my way.

    I appreciate this may be platform specific, I'm using SaxoBank.

    Thanks.
     
  2. say33

    say33

    100 (your capital) x 2 (your leverage) / 5 (CFD's leverage) = 40

    You invest only 40% of your capital (20% on each of 2 positions).
     
    Last edited: Jul 17, 2019
    GregorySG9 likes this.
  3. TKshadow

    TKshadow

    Thanks. Just wanted to check a couple of things:

    1. As a further example If I want 2X leverage on a single CFD it would be (my capital) x (leverage desired) / (CFD leverage)
    2. How do you actually implement only risking the desired percentage of capital on the platform. For example, stock X = $60.00 Initial margin available = $1,000 (say). Let's say I wanted 4 CFDs then this is $240.00 notional value. Assuming a margin requirement of 20% this position would need $48.00 of margin, but then that's still 5X leverage. Perhaps, it's the platform I'm on, but I can't see any option where I can risk any less than that to lower it down to where I'd be 2X levered...
    Obviously, I understand that you'd usually use leverage to get a notional position greater than your deposited margin, but for examples sake I went with the above.

    Thanks.
     
    Last edited: Jul 18, 2019
  4. Peter8519

    Peter8519

    If the trade decision is flawed, leverage won't work. If the trade decision is solid aka good, with a little patient, one will be filthy rich even without leverage.
     
  5. TKshadow

    TKshadow

    I don't mind using leverage as long as it's done sensibly and you don't take excessive risk.