Financial leverage is a powerful tool that can be used to increase your profits in CFD trading. It allows you to control a larger position with a smaller investment, resulting in greater profits if the trade is successful. However, it also increases your risk exposure and can lead to large losses if the trade goes against you.
How can you use it in CFD trading?
There are two main ways to use financial leverage in CFD trading:
First, you can use it to increase your position size. For example, leverage meaning, if you have a $100 account and want to trade a $1000 position, you can use financial leverage to achieve this. This will increase your risk exposure and allow you to benefit more from any move in your favor.
Second, you can use financial leverage to increase the size of a winning position while limiting losses on losing trades. For example, this means that if you have an open CFD trade with a profit of $100, and it moves against you by another $50 before reversing again, instead of getting out at -$50, you can use financial leverage to cover that additional $50 loss, meaning your trade is now at break-even.
In conclusion, financial leverage is a powerful tool that can be used to boost your profits. However, it also increases the profitability and risk of any trade you take in CFD trading.