04/06/2026
How leveraged trading works :
Imagine you have £100. With a 5x leveraged CFD, you can control £500 worth of stock - the broker essentially lends you the rest.
If that stock goes up 10%, you don't make £10 (10% of your £100). You make £50 (10% of £500). That's 5x the return on your money.
But here's the catch... it works the same way on the downside.
If the stock drops 10%, you lose £50. That's half your £100 gone on a 10% move. A 20% drop wipes you out completely.
• You can go long (betting it goes up) or short (betting it goes down)
• Most platforms will automatically close your position if losses approach your deposit - called a margin call or stop out
• CFDs are exempt from stamp duty in the UK, which is a small bonus
And that's why you always want to hedge yourself - keep some uninvested cash on the side so that bigger moves don't wipe you out completely. Think of it as your safety buffer. If a position goes against you, that reserve cash means you live to trade another day rather than blowing up your whole account on one bad move.
Bottom line: 5x leverage amplifies everything, wins AND losses. Size your positions accordingly, always use a stop-loss, and never put all your cash to work at once.
