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CFD trading

  • ESMA — changes in the regulation of CFD trading in Europe

    The European regulator ESMA, the European Agency for securities and markets, published new regulatory requirements from 1 June 2018, which shall enter into force on 1 August 2018 - regardless of the internal regulation in the UK and Germany.

    What are the directions requirements of the ESMA? Changes at the forefront of protective measures for retail customers. From the point of view ESMA CFD trading is not suitable for each retail client, because many traders with excessive shoulder in the past lost too much money.

    In the future among traders CFDs are two main groups or classifications: retail and professional clients.


    ESMA — changes in Retail clients and professional clients

    Clients EU-regulated brokers are divided into two groups: the default will be assigned the status of a retail client. Customers classified as retail clients will enjoy unlimited protection from additional financial obligations when trading CFDs throughout Europe with the entry into force of the new rules ESMA.

    According to the European regulator, to retail customers is necessary to limit the maximum leverage, since many of these clients are losing too much money if they leverage too high.

    Another group of clients is referred to as Professional Clients. These clients are considered to be very experienced and may continue to use high leverage 1: 500 for my trading CFDs with iTrade.

    Many traders worried about the fact that the new requirements "cut shoulder Forex". If You want to continue trading with the same shoulder level, check whether You need to receive professional status.

    To be included in the group of professional customer, the customer must submit a request for reclassification. Additional information can be found here.


    Changes of leverage for retail clients — what shoulder to choose beginner

    Experienced traders know for a long time: leverage effect multiplies not only potential profits but also losses. The chances of increased profit we always face a huge risk of loss.

    From the point of view of the ESMA, retail customers are mainly beginners in trading or less experienced customers who may not always appreciate the effect of leverage and the risks associated with CFD trading.

    In the result, ESMA has decided that retail customers will be given maximum leverage 20 most traded indices like DAX30, not later than 01 August 2018 in the European Union! This applies to all brokers in the EU.





    For the major Forex pairs, that is the most traded currency pairs, the maximum available leverage was set at 30. Below is a detailed overview of the available levels of the shoulder.


    The terms for professional clients


    The CFD brokers is the ability to continue to offer a high level of leverage experienced professional clients.

    A group of professional customers is an extremely experienced and professional in trading CFD, so the CFD broker does not need to offer any extra protection.

    Depending on the provider this may mean that for these clients there are margin risks. iTrade updated the policy's negative balance protection specially before applying any changes.


    Leverage in trading


    For many, the main reason why CFD trading is high leverage. In traditional stocks trading without the shoulder usually of the real rate of return is three to ten percent (per year).

    For products with leverage like CFDs, the yield from ten to fifty percent during one day are possible depending on the amount of leverage, but also increase losses. One inextricably follows another!

    Since leverage also increases the possibility of losses as of December 2018 inexperienced retail clients will also be "protected from themselves". Shoulder for more than 30 main Forex pairs is no longer available for this group of customers.

    In CFD trading leverage reflects the margin required to enter a trading position.

    Margin is the amount you must have as a Deposit on your trading account to hold the position. The rest is borrowed from the broker.

    EXAMPLE. If you use 1:500 leverage you can get profit or loss in the amount of 500 percent when the market moves 1 percent!





    Thus, the effect of leverage allows you to work in the markets even with low trading capital - in both directions.

    It is not for everyone! Need proper risk management (using mental stop loss) and sufficient experience.


    An overview of the available leverage for retail clients


    According to the publication of the ESMA, is a new, maximum levels of leverage for all of Europe (extract):


    • 1:30 (3.33% margin) for major Forex pairs
    • 1:20 (5% margin) for other currency pairs and CFDs on indices and Gold
    • 1:10 for CFDs on indices and other commodities
    • 1: 5 (20% margin) for stock CFDs
    • 1: 2 (50% margin) for the CFDs cryptocurrency


    Major Forex pairs are determined by ESMA 27/03/2018 in the FAQ as follows:


    All other currency pairs are considered to be secondary.


    What index - core (leverage up to 20) and to which is applied the shoulder to 10?

    As defined in the ESMA 27/03/2018 FAQs:

    Major indices:

    UK100, F40, DE30, US30, US500, USTEC, JP225.

    All other indices are considered to be secondary.

    Only professional clients will continue to use larger leverage up to 1:500.

    In the Trader's Account you can use leverage to trade on real and demo accounts. On a demo account is available for various levels of leverage - even after August 2018 on any demo account you can choose leverage up to 1:500 or only 1:20.

    Try different strategies risk free on a demo account iTrade!


    Protection against negative balance

    Currently, ESMA standartisied the negative balance protection in the EU. All retail clients in the EU will enjoy unlimited protection in accordance with the requirements of ESMA.

    Regulatory protection for professional clients is not provided, so this client group may face unforeseen circumstances during extreme market events.

    So iTrade decided to offer the policy's negative balance protection for professional clients, as a kind of voluntary additional insurance broker.

    This policy provides compensation for negative account balance with a maximum payout of € 50,000 to a single client.


    Summing up - what leverage to choose?


    Reasonable regulation for the protection of inexperienced investors is welcome! As of August 2018, CFD traders in the EU are protected from major risks according to ESMA requirements. Experienced CFD traders can (but are not “required”!) To use a higher level of leverage.

    CFD trading is still possible for those who choose this type of trading. Changes in August 2018 will affect the degree of hedging and the maximum available leverage. Take advantage of rising and falling prices by trading CFDs. And do not forget about the possible risks.

    Continue your studies in the financial markets!

    NOTE: In accordance with the General Conditions, iTrade has the discretion to change the amount of the required margin for any CFDs, as well as for individual Orders and / or Positions, or Clients' accounts. In case of such changes, iTrade will notify the Client via email.


    Please note that iTrade will make these changes on April 26th, 2019.


    New regulations will apply to all non-professional customers who do not have open positions at 00:00 EET, counting from their first deal after this hour. If you have open positions, please ensure that you have sufficient funds in your account to cover the new requirements.



    It is necessary to put on open positions is one of the orders, which contains a fixed price. Based on the received order and the parameters of sale, dealing center in the event of achievement of conducting trade.


    To begin work on the trading platform you need a computer with high speed Internet or a device running mobile operating systems Android, IOS, or Windows. For operations on the financial markets requires the availability of funds in the trading account. Before starting to trade it is recommended to pass the training course analysts iTrade.


    To the trading process, it is recommended to start only after a connection is established with the specialists of the company, which will hold a detailed consultation on using the trading platform iTrade. At the end of the explanation, you can start to trade.


    Market trade in the summer period is from 21:00 Sunday to 21:00 Friday GMT. In the winter time — 22:00 Sunday to 22:00 Friday.

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