CFD Trade Examples

CFD Trade Examples - Simple CFD calculations

Trading CFDs is exactly like trading shares except you need a small amount of money up front to control the whole position.

The CFD trade examples below are easy to understand enabling you to go on to the business of trading CFDs profitably. The one stand out feature you’ll find in the CFD trade examples below is the return you make compared to your capital outlay and it’s for this reason that traders love CFDs.

CFD Trade Examples here

Long CFD trade making a profit
Long CFD trade making a loss
Short Sell CFD trade making a profit
Short Sell CFD trade making a loss

Long CFD trade (profit) – CFD trade example 1

Purchase 1,000 FMG shares at $10.00

Action	How to calculate	Result
Total Exposure	1,000 CFDs @ $10.00	$10,000
Initial Margin	$10,000 * 5%	$500
Brokerage	Total exposure * 0.1% or $10	$10
Total Outlay	Initial margin + brokerage	$510

FMG rises over a 5 day period to $10.50 and you lock in profits via a limit to sell (profit target)

Action	How to calculate	Result
Sell price	$10.50 * 1,000	$10,500
~Brokerage	$10,500 * 0.1%	$10.50
^CFD Finance	Total Exposure * ((RBA + 2%)/365) 10,000*(7.25%+2%)/365) 5 days	Approx $2.53 per day Approx $12.67 for 5 days (debit)

Calculating your CFD Profit/Loss

Action	How to calculate	Result
CFD Profit	(number of shares*(exit-entry)) – trading costs
	(1,000 * ($10.50 – $10.00 (profit)) - $20.50 (brokerage) - $12.67 (CFD Finance)
	CFD Nett Profit/Loss	Profit $466.83
Return on Investment	*(Nett Profit or Loss / Margin) 100**	91.54%

CFD Trading

Long CFD trade (loss) – CFD trade example 2

Purchase 1,000 FMG shares at $10.00

Action	How to calculate	Result
Total Exposure	1,000 CFDs @ $10.00	$10,000
Initial Margin	$10,000 * 5%	$500
Brokerage	Total exposure * 0.1% or $10	$10
Total Outlay	Initial margin + brokerage	$510

FMG falls over a 5 day period to $9.70 and your stop loss gets hit.

Action	How to calculate	Result
Sell price	$9.70 * 1,000	$9,700
Brokerage	$9,700 * 0.1% or $10	$10
^CFD Finance	Total Exposure * ((RBA + 2%)/365) 10,000*(7.25%+2%)/365) 5 days	Approx $2.53 per day Approx $12.67 for 5 days (debit)

Calculating your CFD Profit/Loss

Action	How to calculate	Result
CFD Profit	(number of shares*(exit-entry)) – trading costs
	(1,000 * ($9.70 – $10.00 (loss)) - $20.00 (brokerage) - $12.67 (CFD Finance)
	CFD Nett Profit/Loss	Loss $332.67
Return on Investment	*(Nett Profit or Loss / Margin) 100**	-65.29%

Short Sell CFD trade (profit) – CFD trade example 3

Short Sell 1,000 FMG shares at $10.00 – Looking to profit from a falling share price

Action	How to calculate	Result
Total Exposure	1,000 CFDs @ $10.00	$10,000
Initial Margin	$10,000 * 5%	$500
Brokerage	Total exposure * 0.1% or $10	$10
Total Outlay	Initial margin + brokerage	$510

FMG falls over a 5 day period to $9.50 and you lock in profits via a limit to buy (profit target)

Action	How to calculate	Result
Sell price	$9.50 * 1,000	$9,500
~Brokerage	$9,500 * 0.1% or $10	$10.00
^CFD Finance	Total Exposure * ((RBA - 2%)/365) 10,000*(7.25%-2%)/365) 5 days	Approx $1.44 per day Approx $7.2 for 5 days (credit)

Calculating your CFD Profit/Loss

Action	How to calculate	Result
CFD Profit	(number of shares*(entry-exit)) – trading costs
	(1,000 * ($10.00 – $9.50 (profit)) - $20.50 (brokerage) + $7.2 (CFD Finance)
	CFD Nett Profit/Loss	Profit $486.7
Return on Investment	*(Nett Profit or Loss / Margin) 100**	97.34%

contracts for difference

Short Sell CFD trade (Loss) – CFD trade example 4

Short Sell 1,000 FMG shares at $10.00 – Looking to profit from a falling share price

Action	How to calculate	Result
Total Exposure	1,000 CFDs @ $10.00	$10,000
Initial Margin	$10,000 * 5%	$500
Brokerage	Total exposure * 0.1% or $10	$10
Total Outlay	Initial margin + brokerage	$510

FMG rises over a 5 day period to $10.30 and your stop loss gets hit.

Action	How to calculate	Result
Sell price	$10.30 * 1,000	$10,300
~Brokerage	$10.30 * 0.1% or $10	$10.30
^CFD Finance	Total Exposure * ((RBA - 2%)/365) 10,000*(7.25%-2%)/365) 5 days	Approx $1.44 per day Approx $7.2 for 5 days (credit)

Calculating your CFD Profit/Loss

Action	How to calculate	Result
CFD Profit	(number of shares*(entry-exit)) – trading costs
	(1,000 * ($10.00 – $10.30 (profit)) - $20.50 (brokerage) + $7.2 (CFD Finance)
	CFD Nett Profit/Loss	Loss $313.30
Return on Investment	*(Nett Profit or Loss / Margin) 100**	-62.66%

~ CFD brokerage is paid on the total exposure that you have. For instance in a $10,000 position you put in $500 which leaves a difference of $9,500. However, CFD Brokers require brokerage to be paid on the full amount of $10,000.

^ CFD Finance is calculated daily based on your total exposure on that day. Markets fluctuate daily and as a result your financing amount will vary depending on how much your position is worth at close of business (usually New York 5pm) that day. Check your CFD brokers product disclosure statement for further details.

RBA Rate: Please note that the RBA rate can and in fact does change regularly. The above calculations have taken into account the Australian RBA rate as of July 2008.
The RBA stands for 'Reserve Bank of Australia' and you can get more details here.

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