CFD Terms
Trade Position Opening
A position is opened by buying or selling a CFD. When a customer buys Gold for example, he/she buys the CFD. To make a profit, the price of Gold should rise.
When a customer sells Gold, he sells the CFD. To make a profit, the price of gold should fall.
Trade Position Closing
A position is closed by buying/selling the same amount of CFD(s) that was bought/sold earlier, in the same instrument. Closing a CFD position will result in a
profit or loss being realized on customer's account.
Partial Closing of Positions
A closing of an open position might be partial – by executing an opposite trade of a lesser amount than the previously open trade.
Margin
Margin is a cash deposit provided by clients as collateral to cover losses (if any) that may result from their trades. The Level of margin depends on various
parameters: volatility, the nominal value of 1 contract, etc.
Variation Margin
Variation Margin is the current balance alteration caused by price changes of open positions.
Equity Balances
The equity (or balance) on customer's account will fluctuate according to the money he has deposited in his account, according to the trading conducted on his account
and positions held. Therefore customer's equity balance is constantly calculated in-line with market movements.
Margin Call
A demand for additional funds. A requirement by a company (FIBO in our case) that a client brings margin deposits up to a required minimum level to cover an adverse
movement in price in the market.
Stop Out Level
A Stop loss order for customer's open positions is placed at a level where the total Equity balance falls below certain level (Maintenance margin level) of the required
Initial margin. Below this level all of customer's open positions will be automatically closed out. Once the stop-out level has been triggered, the customer will not be
allowed to trade on his account until the equity balance is restored to the required Initial margin level.
Tick
Minimal price fluctuation of the contract (see Specifications).
Spread
Current difference between current bid and ask price of the contract (see Specifications).
CFD Orders
CFD orders are placed in the same way as placing futures or equity orders. In most cases the confirmation will be immediate for market orders. The markets are constantly
moving during the trading week. It is a good practice to place a “stop loss” on your open position. This allows you to control any potential losses in case the market
moves against you. There are a number of order types that you can place that facilitate risk management when trading CFDs. By using these additional order types you have
the ability to control potential profits as well as potential losses on your open positions.
Market Orders
This type of order takes precedence over all other orders. It is an order to buy or sell a CFD contract at the present market price. As long as there is a market for
this contract, the order will be filled at the price given to you at MetaTrader platform.
Limit Orders
This type of order means that a customer sets a limit on price of execution of a trade and it will only be filled at this level. A sell limit order is executed only at
the limit price or higher (better), while the buy limit is executed at the limit price or lower (better).
Stop Orders
A stop order is an order which becomes a market order once a certain price level is reached. These orders are often placed to limit the loss on an open position. They
also are used to initiate positions. Buy stop orders are placed at a price above the current market price. Sell stop orders are placed below the market price. A buy stop
order is activated by a bid or trade at or above the stop price. A sell stop is triggered by a trade or offer at or below the stop price.
