5. Leverage can make your money go further
IG Bank offers one way to trade foreign exchange pairs: CFDs. Both options are leveraged, which can make your money go further. Leverage enables you to open a position on the currency market by paying just a small proportion of the full value of the position up front. For example, opening a CFD on EUR/CHF might require a deposit worth just 1.5% of the total value of the position. This initial deposit is referred to as margin.
The profit or loss you make will reflect the full value of the position at the point it is closed, so trading on margin offers an opportunity to make large profits from a relatively small investment. However it can also amplify any loss, so losses can exceed your initial deposit. For this reason, it’s important to consider the total value of the position before trading CFDs.
To help you manage your risk, IG Bank offers a range of risk-management tools including stop losses, guaranteed stops, price alerts and running balances.