As part of our commitment to give the power back to the retail investor and retail trader, our platform TradeHub® introduces variable margin. Margin is a very powerful feature in itself as it enables you to gain exposure to the markets without committing the whole amount of the position upfront, but still capture the full price change and hence P/L of the underlying asset.
Until now you were presented with a predetermined leverage. Thus you had little choice when it came to your trading or investment needs. This has now changed. With TradeHub® in the trading and investment space, you will be - from now on - given the option to decide, depending on your financial goals, risk attitude and strategy, how much money you want to commit to a trade.
This highly advanced feature is a very important part of your trading experience and an important ingredient in your trading and investing decisions.
From now on all our clients have the freedom to decide how much money they want to borrow at the time of opening the position. By using the slider built into the deal ticket you can control the leverage you want to use for your trading, to the extent where you say you don’t want any leverage at all and you fund your position in full. The last option may be useful if you think of holding your position for longer as it may be cheaper in terms of funding costs.
Variable margin enables you to control not only the leverage, but also the cost of funding as you will not be charged on the portion of capital you have committed to the trade. You can trade with only a fraction the total value, but you can also de-leverage your trades by funding 100% of your position and pay no funding at all. It all depends on your degree of risk taking or risk aversion and your trading and investing goals.
For example if the trade requires you to deposit 5% of the total value of the position as initial margin, that means that effectively you borrow 95% of the value from us, on which you will be charged overnight funding (providing you keep that position open overnight). This translates into leverage of 20. Hence if the market moves in your favour by 1%, your profits are 20% up on your initial investment; if the price moves in the opposite direction, however, your losses will increase accordingly.
If you want less risk, you can de-leverage the trade to, say, leverage of 5. In that case your position will require 20% margin, with 80% of the total value funded by us. This leverage means that whenever the market moves by 1%, your profits or losses will be multiplied by 5, leading to either 5% profits or 5% losses on your initial deposit. If the market moves by 3%, your profit or loss will amount to 15%. It also means that you pay funding on 80% of the capital supplied by us.
You can go as far as 100% margin funded by you, it is entirely up to you, how much you want to contribute and how much you want to borrow.
With TradeHub® you have the total control over the leverage you want to use. Even better, you can decide that on a trade by trade basis, depending on your financial needs, trading strategies or investment goals.