If you’ve just started trading CFDs and suddenly receive a margin call or see a notification about margin requirements from your broker, you might be asking yourself:
“What is margin, and why do I need to deposit more money?”
It can feel confusing at first, but understanding margin is essential for managing risk and keeping your CFD trading account healthy.
Let’s break it down clearly.
What Is Margin in CFD Trading?
Margin is the amount of money your broker requires you to deposit to open and maintain a CFD position.
It acts as a form of collateral a security deposit to ensure you can cover potential losses.
CFD trading uses leverage, which means you can control a large position with a much smaller deposit. Margin is what makes this possible.
Example:
If your broker offers 1:10 leverage, you can open a position worth R100,000 with just R10,000 in margin.
Why Your Broker Is Asking for Margin
There are several reasons your CFD broker may be requesting margin:
1. Opening a New Trade
To open a position, your broker will require initial margin. This is calculated based on the size of your trade and the leverage offered.
If your account balance is too low to meet the required margin, your broker won’t let the trade go through — or will ask you to deposit more funds.
2. Your Existing Trades Are Losing Value
When the market moves against your position, the equity (value) in your account decreases.
If it falls below a certain level, your broker may send you a margin call — asking you to deposit more money to keep your trades open.
If you fail to respond, your broker may begin automatically closing your positions to prevent further losses.
3. Volatile Market Conditions
During periods of high volatility, your broker may increase margin requirements temporarily to protect both you and themselves from rapid losses.
You might receive a request to top up your account even if your trades are doing well, just because the risk level in the market has increased.
Types of Margin You Should Know
- Initial Margin: The amount needed to open a trade.
- Maintenance Margin: The minimum amount you need to keep the position open.
- Margin Call: A warning that your equity has dropped too low, and more funds are needed.
- Stop-Out Level: If your account equity drops below a critical level, the broker may begin closing trades to protect your balance.
What Happens If You Ignore a Margin Call?
If you don’t deposit more funds or reduce your exposure:
- Your broker may automatically close one or more of your positions.
- You could realize a larger loss than expected.
- In extreme cases, if your broker doesn’t offer negative balance protection, your account could fall below zero — and you may owe money.
How to Avoid Margin Problems
- Use conservative leverage, don’t max out your buying power.
- Monitor your open trades frequently, especially in volatile markets.
- Set stop-loss orders to control risk.
- Keep a cash buffer in your trading account to absorb market fluctuations.
- Understand your broker’s margin policy, it varies from one platform to another.
Final Thoughts
When your CFD broker asks for margin, it’s not random — it’s about managing risk for both sides.
Margin gives you access to bigger opportunities, but it also comes with more responsibility.Treat it with respect. Understand the numbers behind your trades. And always stay in control of your exposure — because in CFD trading, margin can make or break your success.
