CFD Trading Examples in 2018


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CFD Trading Examples for 2018 – Simple CFD calculations

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

We made the CFD trading examples below as simple as possible so you can get on with trading. We also updated the charts to include 2018 examples.

The one stand out feature you’ll find in the CFD trade examples below is the return you make compared to your capital outlay. It is the ability to use a small amount of money (margin) to control a larger position (leverage) that makes CFDs so popular around the world.

CFD trade examples we run through

  • 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 1,700 NST shares at $6.00 or $10,200 in total position size. On a side note, NST shares have been trending up since the start of 2017, opening the year at $3.54 and currently sitting at $6.38 as of 27th April 2018.

cfd trading examples nst

 

Chart courtesy of Metastock

Action How to calculate Result
Total Exposure 1,700 CFDs @ $6.00 $10,200
Initial Margin $10,200 * 5% $510
Brokerage Total exposure * 0.08% or $8.16 $8.16
Total Outlay Initial margin + brokerage $518.16

NST rises over a 5 day period to $6.30 and you lock in profits via a limit to sell (profit target).

Action How to calculate Result
Sell price $6.30 * 1,7000 $10,710
~Brokerage $10,710 * 0.08% $8.56
^CFD Finance Total Exposure * (One-month bank bill swap rate + 2.5%) x (number of shares x share price)/360.
5 days.
Approx $1.30 per day
Approx $6.54 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 * ($6.30 – $6.00 (profit)) – $16.72 (brokerage) – $6.54 (CFD Finance)  
CFD Net Profit/Loss Profit $486.73
Return on Investment (Net Profit or Loss / Margin) * 100 95.4%

Long CFD trade (loss) – CFD trade example 2

Purchase 1,700 NST shares at $6.00

Action How to calculate Result
Total Exposure 1,700 CFDs @ $6.00 $10,200
Initial Margin $10,200 * 5% $510
Brokerage Total exposure * 0.08% or $8.16 $8.16
Total Outlay Initial margin + brokerage $518.16

NST falls over a 5 day period to $5.70 and your stop loss gets hit.

Action How to calculate Result
Sell price $5.70 * 1,700 $9,690
Brokerage $9,690 * 0.08% or $7.75 $7.75
^CFD Finance Total Exposure * (One-month bank bill swap rate + 2.5%) x (number of shares x share price)/360.
5 days.
Approx $1.30 per day
Approx $6.54 for 5 days (debit)

Calculating your CFD Profit/Loss

Action How to calculate Result
CFD Profit (number of shares*(exit-entry)) – trading costs
(1,700 * ($6.00 – $5.70 (loss)) – $15.91 (brokerage) – $6.54(CFD Finance)  
CFD Nett Profit/Loss Loss $487.54
Return on Investment (Nett Profit or Loss / Margin) * 100 -95.59%

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

Short Sell 1,000 Bellamy’s shares (ASX:BAL) at $10.00 – Looking to profit from a falling share price. In late 2016, Bellamy’s ran into supply contract issues in China and then went into a trading halt on the 9th of December 2016.

Bellamy’s then emerged from the trading halt several days earlier than expected, during lunch, catching shareholders by surprise. As a result, shares plummeted over 30 percent on the day.

As you can appreciate, some may consider this an ideal opportunity to short sell. This short sell outlined below is for example only.

cfd trading examples with Bellamys

Action How to calculate Result
Total Exposure 1,000 CFDs @ $10.00 $10,000
Initial Margin $10,000 * 5% $500
Brokerage Total exposure * 0.08% or $8min $8
Total Outlay Initial margin + brokerage $508

BAL shares fall over a 5 day period (hypothetical example) to $9.50 and you lock in profits via a limit to buy order (profit target).

Action How to calculate Result
Sell price $9.50 * 1,000 $9,500
~Brokerage $9,500 * 0.08% or $8min $8.00
^CFD Finance Total Exposure * Relevant Bank Bill rate minus 2.5%. If the interbank rate is greater than 2.5%, you receive a credit. If it is below, then you receive a debit. So you don’t always get paid to be short a CFD position. In this example, we will say the Bank Bill rate is 2.5%, so there is no credit or debit.

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)) – $16 (brokerage) + $0.00
(CFD Finance)
 
CFD Nett Profit/Loss Profit $484
Return on Investment (Nett Profit or Loss / Margin) * 100 95.27%

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

NOTE: The example below is based on the hypothetical Bellamy’s (ASX: BAL) chart shown above.

Short Sell 1,000 Bellamy’s (ASX: BAL) 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 * 0.08% or $8min $8
Total Outlay Initial margin + brokerage $508

Bellamy’s (ASX:BAL) 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 * 0.08% or $8min $8.24
^CFD Finance Total Exposure * Relevant Bank Bill rate minus 2.5%. If the interbank rate is greater than 2.5%, you receive a credit. If it is below, then you receive a debit. So you don’t always get paid to be short a CFD position. In this example, we will say the Bank Bill rate is 2.5%, so there is no credit or debit.

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)) – $16.24 (brokerage) + $0.00
(CFD Finance)
  CFD Nett Profit/Loss Loss $316.24
Return on Investment (Nett Profit or Loss / Margin) * 100 -62.25%

~ CFD brokerage is paid on your total exposure. For instance, in a $10,000 position, you put in $500, which leaves a difference of $9,500. However, most CFD Brokers require brokerage to be paid on the full amount of $10,000. CMC Markets modified their calculations allowing traders to pay only on their borrowed portion.

^ 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 5 pm). Check your CFD broker’s Product Disclosure Statement (PDS) for further details.

Interbank rate: Please note the Interbank rate changes regularly. The above calculations are for example only and are purely hypothetical, but you should get the idea.

Why does my head hurt when calculating CFD finance?

I’m not going to lie by suggesting I was excited about updating this page. CFD finance is a tough nut to crack. It’s hard to calculate and even harder to get the correct figure.

You will be pleased to know your CFD broker will calculate all of this for you, automatically. Yes, automatically.

Simply review your statement on a daily basis to see what your overnight financing charges are. Your broker should have a quality support team who can help you understand these figures.

Hopefully you now clearly understand how both long and short trades work with the CFD trading examples provided here.

Feel free to come back to this page as we are keen to update it with some Forex trading examples as well. And for those who trade Indices, we are looking to add some index CFD trading examples too.

Our preference when it comes to index CFDs is the Aussie 200, S&P500 and the DAX index.

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