Long Position
A "long position" is a term used to express the fact that the
spread better is betting that a financial instrument will RISE in value. If you bought a share with City Index, you are "long" this share.
Short Position
A "short position" is a term used to express the fact that the trader is betting that a financial instrument will FALL in value. It can be used in any financial instrument, like a "Long" position, but instead of expecting the market to rise, the trader is betting the market will fall in price. The trader closes a "Short" position by buying back the financial instrument.
Margin trading
Margin trading is an expression used to classify the act of peculation where the trader is not paying the full price of the financial instrument. Rather the trader is depositing a payment on his
spread better account, which is determined by the size the position. This is sometimes known as “Notional Trading Requirement”.
Margin requirement
Also known as the Notional Trading Requirement, it is the amount of funds that need to be available on the traders account in order to execute the trade.
Margin classification Initial & Variation
There are two kinds of margins in the financial market.
Initial Margin
Initial Margin is the amount of money needed on the
spread better account to place the trade. This is a small percentage of the total value of the trade.
Variation Margin
Variation Margin is the amount of funds needed to cover a losing position in an open trade. If the trader has opened a “Long Position” in the FTSE 100 Index, and the open bet is losing the trader £100, the variation margin will be £100, on top of what the trade has to place on "Initial Margin" to open the trade in the first place.
Margin Call
A Margin Call is a communication from City Index, either via letter or phone, to inform the trader that the amount of funds available on the
spread better account is not enough to cover the amount of money required for the "Variation Margin".
Stop Loss Order
A "Stop Loss Order" is an order to execute a trade which will close an open position on the traders account. Although it is called a "Stop Loss Order" it does not mean that the trader will lose on the trade. The trader may have placed a "Stop Loss Order" to protect an open
profitable position in order to preserve the profits.
A stop-loss is FREE of charge and can be placed wherever the traders sees fit, although it can not be placed within the "Bid/Ask".
