Trading

Leverage is borrowing buying power from your broker so you can control a larger trading position with a smaller amount of your own money, known as the margin.

For example, with 10:1 leverage, you can control a £1,000 CFD position with only £100 of your own funds. If the asset's price rises by 5%, your position gains £50, which is a 50% return on your £100 margin. However, if the price falls by 5%, you lose £50, which is also a 50% loss on your margin.

Leverage can increase profits, but it also increases losses by the same amount. This is why even small market movements can have a significant impact on your account balance when trading CFDs.

Margin is the amount of your own money that you must deposit to open and maintain a leveraged trade. Think of it as a security deposit rather than the full value of the trade.

For example, if you want to open a CFD position worth £1,000 and the margin requirement is 10%, you only need to put up £100. The broker effectively allows you to control the full £1,000 position using that £100 margin.

It's important to remember that your profits and losses are calculated on the full £1,000 position, not just the £100 margin. If losses become too large, your broker may require you to add more funds or may automatically close your position to prevent further losses. This is known as a margin call or stop-out, depending on the broker's policies.

The basic formula is:

Margin = Position Size ÷ Leverage

If your leverage is 10:1, it means you only need to provide 10% of the total position value as margin.

A pip (percentage in point) is the standard unit used to measure price movements in the forex market. For most currency pairs, 1 pip = 0.0001 (the fourth decimal place).

For example, if GBP/USD moves from 1.2500 to 1.2501, it has moved 1 pip. If it moves from 1.2500 to 1.2550, it has moved 50 pips.

For currency pairs involving the Japanese yen, a pip is usually 0.01 (the second decimal place). For example, if USD/JPY moves from 150.00 to 150.01, that's a move of 1 pip.

The monetary value of a pip depends on the currency pair being traded, the size of your position, and the account currency.

Pips are important because they give traders a standard way to measure price movement, risk, and profit/loss.

Instead of saying, "GBP/USD moved from 1.2500 to 1.2550," traders say, "It moved 50 pips." This makes it easier to discuss and compare trades across different currency pairs.

Pips are also essential for risk management. Before entering a trade, traders often set a stop-loss and a take-profit in pips. For example, you might risk 20 pips to potentially gain 40 pips, giving you a 1:2 risk-to-reward ratio.

A margin alert level, sometimes called a margin warning, is a threshold set by your broker that warns you when your available funds are getting too low relative to the margin being used by your open positions.

The calculation is usually based on your margin level:

Margin Level (%) = (Equity ÷ Used Margin) × 100

Where Equity = Account balance + unrealized profit/loss, and Used Margin = Margin currently tied up in open trades.

The purpose of a margin alert is to give you a chance to deposit more funds, reduce or close positions, or lower your risk. If losses continue and your margin level falls further, the broker will automatically close some or all of your positions. This is called a stop-out and typically occurs at a lower percentage than the margin alert level.

Margin auto close-out, also called a stop-out, is a safety mechanism where your broker automatically closes your open positions when your account no longer has enough equity to support them. This happens when your margin level falls below a certain percentage set by the broker. The formula is:

Margin Level (%) = (Equity ÷ Used Margin) × 100

Since CFD trading uses leverage, losses can accumulate quickly. Auto close-out helps protect you from excessive losses and protects the broker from lending more than your account can support.

A dividend is money that a company pays to its shareholders, usually from the profits it has earned. If you own shares in a company, you own a small piece of that business, and a dividend is one way the company can reward you for being an owner.

For example, suppose you own 100 shares of a company, and the company declares a dividend of £0.50 per share. Your dividend payment would be 100 shares × £0.50 = £50.00, paid directly into your brokerage account or bank account.

It's important to understand that dividends are not guaranteed. A company can increase, reduce, or cancel its dividend depending on how well the business is performing.

All dividends are paid in Pound Sterling. If any dividend or corporate action payment is received in a different currency, it will be converted to Pound Sterling and a foreign exchange fee of X% will apply.

To be eligible for a dividend, you must hold the shares at the close of trading on the business day before the ex-dividend date. The ex-dividend date is when a share begins trading without entitlement to its next dividend payment.

Ex-dividend dates are announced in advance by both the company and the London Stock Exchange (LSE), and can usually be found in the company's latest financial results or dividend announcements. If you purchase shares on or after the ex-dividend date, you will not receive the upcoming dividend.

Once we receive your dividend payment, we'll credit it to your account in Pound Sterling as soon as possible.

A watchlist is a tool that allows you to keep track of investments you're interested in without buying them. It can help you monitor share prices, performance, and market movements so you can research and compare investments before making a decision.

You can use a watchlist to follow investments you already own, investments you're considering buying, or sectors and markets you want to keep an eye on.

To create a watchlist, log in to your account and search for the investment you would like to track. From the investment's details page, select the option to add it to your watchlist. Once added, you can view and manage all of your watched investments in one place, making it easier to monitor their performance and stay up to date with market activity.

You can add or remove investments from your watchlist at any time, and using a watchlist does not involve buying or selling any investments.

A price alert is a notification that lets you know when an investment reaches a price level you have chosen.

Price alerts can help you monitor investments without needing to check the market constantly. For example, you might set an alert to notify you if a share price rises above a certain level or falls below a price at which you may be interested in buying.

To set up a price alert, search for the investment you want to track and select the option to create an alert. You can then enter your chosen price level and decide how you would like to be notified, where available.

Price alerts are provided for information purposes only and do not automatically place a BUY or SELL order when the target price is reached. If you wish to trade, you will need to place an order separately.

Negative balance protection (NBP) is a regulatory safeguard that applies to most retail clients trading products such as CFDs and Spread Bets with FCA-regulated brokers in the UK. In simple terms, it means you cannot lose more money than you have deposited into your trading account. When you trade with leverage, you are controlling a position that is much larger than your account balance, which can magnify both profits and losses. In fast-moving markets, there is a risk that losses could exceed the funds available in your account. NBP prevents this from happening by ensuring that your account balance cannot fall below zero.

For example, if you deposit £1,000.00 and open a leveraged trade, a sudden market movement could cause significant losses. Without NBP, those losses might exceed your £1,000.00 deposit, leaving you with a negative account balance and a debt owed to us as the broker. With NBP, however, we absorb any losses beyond the funds in your account. The worst outcome is that you lose the £1,000.00 you deposited and your account balance falls to £0.00, but you do not owe any additional money.

It is important to understand that NBP does not protect you from losing your investment. You can still lose all of the money you have deposited if your trades perform poorly. What it does protect you from is ending up in debt to us because of extreme market volatility or sudden price movements.

Automatic dividend reinvestment is not currently expected at launch.

If this feature becomes available in future, we will provide full details on how it works and which account types and products are eligible.

In compliance with European regulatory standards (ESMA), the maximum leverage available to retail clients is capped and varies depending on the volatility of the financial instrument you are trading.

Leverage allows you to control a larger position with a smaller amount of capital, but it also significantly increases the potential for both profit and loss. We encourage all traders to use our risk management tools and trade responsibly.