What is margin trading, and does Totality offer margin lending?

Margin can be compared to a mortgage, where you put up collateral when buying something more expensive than you can afford.

Margin trading enables you to amplify the potential of your trade by using borrowed funds to trade securities, also known as leveraging or gearing. This allows you to get a bigger exposure than your initial capital would.  

When trading with leverage, your potential profits are bigger, but it’s important to note that the same goes for potential losses.

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Margin trading at Totality

Totality offers various financial instruments including CFDs, Futures, FX Options, FX Spot etc. When you trade in such contracts, you are not buying an actual asset (e.g. with stock trading) but you are entering into a contract.

At Totality, you cannot sell stocks you do not own. However, if you wish to short a stock (sell without owning the stock), you have the option to short the CFD based on that stock.

Margin trade example

Suppose you want to invest in Apple Inc.

Please see a comparison of buying the Apple Inc. CFD, with a margin requirement of 10 %, vs. buying a stock.

As you can see from the above example, the client trading CFD only uses USD 1,700 as collateral, having the opportunity to further invest USD 18,300 (20,000 - 1,700).

If the client trades a stock, he uses most of his cash, leaving only USD 3,000 (20,000 - 17,000) available for further investments.

* We excluded commissions and other costs to simplify an example.

Margin trading requirements

Margin requirements refer to the minimum amount of funds that must be in your account to open and maintain a margin trade. You can check the requirements for a specific margin product by clicking 

on the security > Instrument > Margin.

• Initial margin determines how much you need in your account to open the margin position.  

• Maintenance margin is a continuous margin check, meaning to hold the open position you must maintain a certain amount of cash or approved margin collateral.  

Margin trade requirements example

Suppose the initial margin requirement is 2% for your CFD and you have a total exposure for the underlying asset of USD 20,000.  

Then 20,000 *0,02= USD 400 must be available in your account as a margin to open the trade.

Suppose the maintenance margin of your trade is 200 USD, then you need to have at least 200 USD in cash to keep the position open. Margin requirements are not binding and can change depending on the market conditions.

If your margin utilization percentage reaches 100%, all your margin positions will be stopped out.

* We excluded commissions and other costs to simplify an example.

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