What are the common terms that I should be familiar with when trading CFD?
Below are the terms that you would commonly come across when using CFD and reflected in your statement and account management.
a) Ledger: Initial cash deposit – commission (inclusive of GST) – realized finance charges + Realized Profits/Losses
b) Equity Balance = Ledger + Unrealized Profits/Losses + Unrealized Finance Charges Mark-to-market at end of each trading day
c) Initial Margin (IM): The required available balance (margin excess) in customer’s CFD account prior to buying or selling CFD contract. Starts from 10% of market value of portfolio.
d) Maintenance Margin (MM): The minimum amount of Equity Balance that must be maintained in customer’s CFD account. Starts from 10% of market value of portfolio. Mark-to-market at end of each trading day
e) Force Liquidation Margin (FM): If equity balance falls below 5% of market value of portfolio, customer will receive notification to top up the account to maintenance margin level. Mark-to-market at end of each trading day.
f) Margin Excess (Available balance) = When the value of the equity balance rises above that of the initial margin, the difference is the margin excess. Margin Excess = Equity balance – Maintenance margin
g) Margin Deficit: MM – Equity BalanceDid you find this question helpful? Please rate this answer: Page Views: 300