CFD trading and potential losses

Beginner Questions
1

Hello,

I am trying to understand losses on CFD trading for practice, can someone please shine some light on what my maximum loss would be if I shorted $10,000 of a CFD share using 1:5 (20%) leverage? I am starting with a $2000 initial deposit.

I am thinking it is $2000 that i could potential lose as a maximum given its my initial deposit, but unsure with how CFDs.

Thanks

2

Hi,
I am not sure you have given sufficient information for an answer to be forthcoming. I am not sure what you mean by “shorting $10,000 of a CFD share using 1:5 leverage”. For example, if you shorted 100 shares at $100 each and set a stop loss at $120, then yes, your risk capital would be $2,000. That would be unadvisable if I have understood you correctly. Unless, of course your actual total capital would be of the order of $100K to $200K.

3

Hi Mondeoman,

Thank you for your reply,

By that I mean, selling $10,000 of notional value in a CFD share with a $2,000 deposit. I’d like to understand what my max potential loss would be if we say ignore stop losses. For CFDs, would my max losses be my $2,000 capital or unlimited?