I am not intending on buying CFDs right now as I am too new to trading. Although I think I understand the risks of margin lending in a very simple way, can anyone enlighten me further?
Let's say I have $20,000. Due to the risky nature of CFDs, I choose to play it safe and put $1000 down, giving me on a 90% basis $10,000 of shares to purchase.
Then let's say it all goes horribly wrong and the shares lose basically all of their value. My simple udnerstanding of CFDs says that even though I only fronted $1000 I would have to find $10,000 to pay what I lost and owe. Am I right? I read somewhere you could end up owing more than your original input, but surely you would be prepared for this by making sure you had a contingency to cover 100% of potential losses.
Like I said, no CFDs for me right now, or maybe ever, but I feel I should understand them as much as possible.