Cash borrowed (any currencies besides KZT)
Margin trades can also be called “Leverage” trading. This is an opportunity to buy securities for a larger amount than you have. You borrow money from the broker and buy stocks on credit. The loan is secured by the value of the assets in your account.
How does leverage work?
Promising stock (potential +25%)
→ You need to invest KZT 4 million
→ There is KZT 1 million “on hand”
→ Broker lends 3 million tenge
If the stock grows by the predicted 25%, then:
→ you will receive KZT 1 million profit, and
→ the broker will receive back KZT 3 million borrowed from this trade
How to use leverage?
It is easy to borrow the funds. The volume of stocks available for buying, taking into account leverage, is automatically displayed in the Freedom Broker trading terminal.
Note: don’t forget to enable the “margin” option in the “Order - Order Settings” tab.
To obtain the margin loan, the trading platform will evaluate your securities portfolio. The assets must be liquid and of sufficient value to become collateral for a loan from the broker.
The broker charges a commission for margin trading:
- Cash borrowed (any currencies besides KZT) - 15% per annum in US Dollars;
- Cash borrowed (tenge KZT) - 18,5% per annum in US Dollars;
- Securities borrowed - 15% per annum in US Dollars.
The commission is charged daily on the amount of debt.
Be aware of the risks!
Leverage can increase not only profits, but also losses.
Without leverage: the stock fell by 25% - you lost 25% of your invested funds.
With “1:4” leverage: the stock fell by 25% - you lost 100% of your invested funds.
If the situation worsens further, the broker will request that the investor either deposit additional funds into the account or sell some of the securities. Such request is called the scary market words “margin call” - that is, “requests for additional collateral”. And only then, if losses continue to mount, the broker will force the investor to sell the securities to get money back.
But it is very important to note that most modern stock market brokers try to prevent such large customers losses from margin transactions. For this purpose, brokers have special risk management standards and loss prevention measures.
We recommend you to read more
fbroker.kz→ About the company → Documents → ANNEX 7 - Margin loans transactions rules