Leverage is the ability to borrow money in order to make more profit. Leverage can be done with CFD trading by using a margin account. There are many benefits of leverage meaning, including lowering your risk and increasing your return on investment.
We will look at few advantages that come with leveraging in CFD Trading!
Increase your return. Leverage allows you to invest in the market without putting down full value of what is being invested into it by using less money than you would normally need to be able to trade with that asset.
For example, assume Investor X wants to purchase $20000 worth of Apple stock for their portfolio but they only have $10000 at their disposal.
Without leverage, this investor will not be able to buy any shares because they do not meet the minimum requirement set by the broker. Using margin trading through a CFD account however,
Investor X can put up an initial deposit or margin and borrow additional funds from the broker allowing them access to more capital which means there are now no restrictions on how many stocks they can buy.
In conclusion, leveraging your investment is a great way to increase the amount of money you can make or invest in an asset without spending all that much.