# CFDs and leverage: How much can I lose?



## damien275x (17 June 2011)

So I have been trading shares on the ASX via commsec etc and it's usually short-medium term. I am thinking of opening a CFD trade account so I can go short as well as long. I am aware they are leveraged products. Since they are contracts for difference, just say: Buy: $1000, I only put down $100 or whatever the % is. Is it correct that the max I can lose is $1000 on this CFD

I guess what I am trying to say is I don't want to ever land in a situation where I need to pay up more than I have in cash!


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## cynic (18 June 2011)

damien275x said:


> So I have been trading shares on the ASX via commsec etc and it's usually short-medium term. I am thinking of opening a CFD trade account so I can go short as well as long. I am aware they are leveraged products. Since they are contracts for difference, just say: Buy: $1000, I only put down $100 or whatever the % is. Is it correct that the max I can lose is $1000 on this CFD
> 
> I guess what I am trying to say is I don't want to ever land in a situation where I need to pay up more than I have in cash!




I have traded Commsec CFD's in the past, although I only took long positions at the time, my understanding is that your losses on a short position are potentially unlimited if the market moves against you. The autoclosure of cfd positions due to margin/deficit cannot be automatically depended upon as this rule is normally intended primarily for the protection of the broker (although some cfd providers try to promote it as beneficial to the client) and may be exercised in a somewhat discretionary fashion (by the broker).

To the best of my recollection, when I wanted to limit my exposure to unfavourable moves, I was able to place contingent orders that would effectively liquidate my position should the market move sufficiently against me. Again, it is important to consider the impact of liquidity (or lack thereof) and it's impact on risk management.

Commsec do have a CFD desk and I experienced them to be quite helpful when questioned on trading with their cfd products via their trading platform.

Incidentally, I haven't traded with Commsec since last year, so I won't be up to date with any changes that may have occurred since then.


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