CFD trading example
With CFD trading your profit or loss is determined by the difference between the buy price and the sell price of the financial instrument that you are trading.
An index trade
Placing a trade
The US30 is trading at 12,996/13,000. You think that the US30 price is going to rise in value so you decide to go long and buy 1 US30 contract at 13,000. Your position value therefore is $13,000.
Margin
The margin requirement on the US30 in this example is 10%, therefore the initial margin required is $1,300.
Your open position
You now hold a position of 1 US30 contract at $13,000
Later that day the US30 moves to 13,200/13,204 so you decide to sell 1 US30 CFD at 13,200.
Closing the position
In this example you closed the position within the same day as opening and did not hold it overnight therefore there is no financing charge and because Indices are commission free* there is no commission charge.
Your gross profit is therefore 13,200 – 13,000 = $200
Your P&L
Your percentage return on investment on this trade is $200 (profit) divided by $1300 (initial margin) = 15.3%
Compare this to the underlying percentage price change (13,200-13,000)/13,000 which is just 1.5%
If however the markets had moved in the opposite direction by 1.5% you would have lost $200 which is a loss of 15.3%.
Examples used are for illustrative purposes only and not to be misunderstood as a recommendation. Real market conditions will vary the results.
*Remuneration is from the spread between bid and ask prices
