Jump to content

How does margins work?

Recommended Posts

Hi everyone, I have just started an IG demo account so I can be fully prepared before putting my own funds. One of the concepts that I find a bit confusing are margins. On my demo account, I see that the margin changes as the price of the underlying fluctuates, which confuses me as I thought that its value was fixed once you open the position. If I for example have an account balance of £500 and invest £1 per bpt for an upturn in the S&P 500 when its price is 2800, then the margin would come up as £140 (margin= 5%). Is the £140 the initial margin or maintenance margin? Is the mechanism that once my losses reach £70 (50% of the margin) then my position will be closed? I have noticed that my margin decreases when my p&l increases and vice-versa so I am unsure if the £70 threshold would apply any longer?

I have tried to experiment on the demo account which scenarios the margin (£140) may impact my funds but see that every time I close my losing positions my funds only decreases by the value of the p&l while the £140 seems to magically disappear. I wanted to ask if there is any scenario where I can lose the margin (£140) after closing my positions?

I am new to this platform so apologies if I am missing any fundamental knowledge.      

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • Create New...