CFD trading example

Account opening transaction

CFD trading case

The profit or loss is determined by the difference between the price when entering the transaction and the price when exiting the transaction. Please note that the quotation display always shows the selling price on the left and the buying price on the right.

Example 1: Buy ABC company stock CFD

In this example, the transaction price of ABC Company is 1599/1600p. Suppose you think that the price will rise, so you are ready to buy 1,000 shares of CFDs (units). The ABC company's primary margin rate is 5%, which means that you only need to deposit 5% of the value of the position as the position margin. In this example, your position margin is £800 (5% x (1000 units x 1600p buying price)). Please note that if price fluctuations are not good for you, your loss may exceed the initial position margin of £800.

Scenario  A: Profitable Trading 
Your prediction is correct, and the price rises to 1625/1626 in an hour. You decide to close your position and sell at 1625 (the new selling price).

The price has moved 25 points (1625-1600) in your favor. Multiplying this value by the position size (1000 units) yields a profit of £250.

Scenario  B: Trading at 
a loss Unfortunately, you made a mistake in your prediction and the stock price of ABC Company fell to 1549/1550 in an hour. You think that the price may continue to fall, so in order to avoid further losses, you decide to sell at 1549 (the new selling price) and close the position.

The price has moved 51 points (1600-1549) in a direction against you. Multiply this value by the position size (1000 units) to calculate the loss as £510.

Example 2: Sell ABC company stock CFD

In this example, the transaction price of ABC Company is 1599/1600p. Suppose you think that the price will fall, so you are ready to sell 1,000 shares of CFDs (units). The ABC company's primary margin rate is 5%, which means that you only need to take out 5% of the total value of the position from your own funds as the position margin. In this example, your position margin is £799.50 (5% x (1000 units x 1599p selling price)).

Please note that if price fluctuations are not good for you, your loss may exceed the initial position margin of £799.50.

Scenario A: Profitable trading
Your prediction is correct, and the price drops to 1549/1550 in an hour. You decide to end the transaction and buy it back at 1550p (the new purchase price).

The price has moved 49 cents (1599-1550) in your favor. Multiplying this value by the position size (1000 units) calculates a profit of £490.

Scenario B: Loss trading
Unfortunately, your prediction was wrong, and the stock price of ABC Company rose to 1649/1650 in an hour. You decide to stop loss, buy at 1650 (the new purchase price), and close the position.

The price has moved 51 points (1650-1599) in a direction against you. Multiply this value by the position size (1000 units) to calculate the loss as £510.

Remember, the margin is only for orders that are holding positions.

Commission

Stock CFD transactions are charged for every transaction. UK stock trading charges 10 basis points (0.10%), and the minimum commission fee charged for each transaction is £9.

To determine how much commission you have to pay, you can multiply the position size by the applicable commission rate.

In the example of ABC Company above, the fee for opening a buy position is calculated as follows:

1000 (unit) x 1600p (price) x 0.10% = £16.00

The cost of closing a buy position is calculated as follows:

1000 (units) x 1625p (price) x 0.10% = £16.25

Holding cost

If you still hold a position after 5:00 pm New York time, you will be charged the cost of holding the position; if the position has a fixed expiration time, the cost will be included in the product price.

We use the Interbank Offered Rate of the currency in which the product is denominated to calculate the holding fee rate applicable to holding costs. For example, the UK 100 (pound sterling) is based on the London Interbank Offered Rate (Libor). For buy positions, we charge the London Interbank Offered Rate plus a 2.5% fee; for sell positions, you will receive the London Interbank Offered Rate minus 2.5% of the fee, unless the underlying Interbank Offered Rate Equal to or lower than 2.5%, in this case selling positions may incur holding costs.

You can click the Account menu and then click the History tab to view your historical holding costs.

Learn more about how to trade CFDs and the advantages of CFD trading, such as short selling and hedging real stocks.


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