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CFD trading examples

Want to get started in CFD trading, but don’t know how? Our CFD examples will guide you through opening and closing trade positions, and calculating your profits or losses from your trades. From initial impressions, it may seem that CFD trading is more complicated than traditional trading, but as you will see from these examples, that’s not necessarily the case.

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CFD examples can only get you so far

While the CFD trading examples below will give you a great introduction to the inner workings of how you could potentially profit from CFD trading, the best way to learn is by doing. Open a free zero-risk demo account to gain access to our institutional-grade trading platform.

The deal ticket in the platform doubles as a CFD calculator and will show your expected profit and loss for a trade before you execute, based on the number of units and stops/limits you’ve specified. Once you feel comfortable placing trades in the demo account, you have the option to upgrade to a fully-funded account to realise potential profits from your new-found trading edge.

Example 1: buying XYZ

In this example, XYZ is trading at $50.01/$50.02. Assume you want to buy 1,000 share CFDs (units) because you think the price will go up. XYZ has a tier 1 margin rate of 20%, which means that you only have to deposit 20% of the position’s value as position margin.

In this example, your position margin will be $10,004 (20% x (1,000 (units) x $50.02 (buy price)). Remember that if the price moves against you, it is possible to lose more than your initial position margin of $10,004.

Outcome A: a profitable trade

Your prediction was correct and the price rises over the next hour to $50.51/ $50.52. You decide to close your position by selling at $50.51 (the current sell price).​

The price has moved $0.49 ($50.51 – $50.02) in your favour. Multiply this by the number of units (1,000) to calculate your profit which is $490.

Outcome B: a losing trade

Unfortunately, your prediction was wrong and the price of XYZ drops over the next hour to $49.51/$49.52. You feel the price is likely to continue dropping, so to limit your losses you decide to sell at $49.51 (the current sell price) to close the position.

The price has moved $0.51 ($50.02 - $49.51) against you. Multiply this by the quantity (1,000 units) to calculate your loss which is $510.​The price has moved 51 cents ($50.02 - $49.51) against you. Multiply this by the quantity (1,000 units) to calculate your loss which is $510.

Trade CFDs on over 12,000 financial assets

Example 2: selling XYZ

In this example, XYZ is trading at $50.01/$50.02. Assume you want to sell 1,000 share CFDs (units) because you think the price will go down. XYZ has a tier 1 margin rate of 20% which means that you only have to put forward 20% of the total position’s value from your own funds as position margin.

In this example, your position margin will be $10,002.00 (20% x (1,000 (units) x $50.01 (sell price)).​

Outcome A: a profitable trade

Your prediction was correct and the price falls over the next hour to $49.51/$49.52. You decide to close your trade by buying back at $49.52 (the new buy price).​

The price has moved $0.49 ($50.01 - $49.52) in your favour. Multiply this by the size of your position (1,000 units) to calculate your profit which is $490.

Outcome B: a losing trade

Unfortunately, your prediction was wrong and the price of XYZ rises over the next hour to $50.51/$50.52. You decide to cut your losses and buy at $50.52 (the new buy price) to close the position.​

The price has moved $0.51 cents ($50.52 - $50.01) against you. Multiply this by the quantity (1,000 units) to calculate your loss which is $510.

Remember, margin requirements are only applicable to net open positions

Learn how to trade CFDs with our in-depth video tutorial.

Calculating CFD profits and losses

Our CFD examples offer a good way to learn how trading CFDs works, as it can help to see a trade in practice to fully understand the trading process. Whether you’re a beginner or a seasoned trader, these examples can help you to visualise making a trade, and the resulting profit or loss.

Your profit or loss is determined by the difference between the price you enter a trade at and the price you exit at. Remember that prices are always quoted with the sell price on the left and the buy price on the right. Read more about the bid price and ask price.

CFD trading for beginners

When you start CFD (contracts for difference) trading as a beginner, you should first understand the basics of trading CFDs. View our CFD examples and consider opening our CFD demo account, where you can practise trading in a risk-free environment.

Once you learn the basics, you can progress to more advanced learning through technical and fundamental analysis. However, as a beginner in CFD trading, our examples can help you to understand the CFD trading process, and how to work out profits and losses. You should also be aware of the costs associated with trading CFDs.

CFD trading explained

CFD trading allows you to speculate on the price movements of an array of financial instruments. You can opt to go long and ‘buy’ if you believe the market price will rise, or go short and ‘sell’ if you think the market price will fall. You do not own the underlying asset you are speculating on, and therefore you are exempt from stamp duty. Find out more on our CFD meaning page to help determine if they are right for you.

Commission explained

CFD commissions are only applicable for CFD shares. Therefore, opening and closing positions are commission-free for all forex, indices, commodities and treasuries instruments. CFD share trades attract a commission charge for each trade.

To determine how much commission you would pay, multiply your position size by the applicable commission rate. Read more about CFD commissions here.

Holding costs explained

If you hold any position after 5pm New York time, you will be charged a CFD holding cost, or if the position has a fixed expiry the cost is built into the price of the instrument.

We calculate the holding rate applicable to the holding cost based on the risk-free or interbank lending rate of the currency in which the instrument is denominated. For example, the Australia 200 is based on the Banker Acceptance Bill 1 month rate. For buy positions, we charge 2.5% above this rate. For sell positions you receive this rate less 2.5%, unless the underlying interbank rate is equal to or less than 2.5%, in which case sell positions may incur a holding cost.

You can view your historic holding costs by clicking on the account menu and then the history tab.

Why trade CFDs with CMC Markets?

Here at CMC Markets we have been experts in CFD and spread betting trading since 1989. With 30 years’ experience in trading on the financial markets, you can be confident you’re trading CFDs with the right provider. We have a dedicated support team available 24 hours a day from Sunday evening through to Friday evening, to assist you with any problems you might have. There’s a lot to consider when choosing a trading partner, so make sure you visit our ‘why CMC’ page to see what makes us different. Compare trading platforms between our award-winning Next Generation and MetaTrader 4. Learn more about our software, which has won awards for best CFD trading platform*.

  1. Open a CFD trading account. You can open a live account to trade CFDs with real money, or a demo account to hone your skills and familiarise yourself with the platform, across a huge range of global markets.
  2. Choose the financial instrument. Choose the CFD instrument, such as AUD/USD, that you want to trade on. We offer CFDs across a wide range of global markets, including forex, indices, commodities, shares and treasuries.
  3. Choose to buy or sell. Buy (go long) if you think prices will rise, or sell (go short) if you think prices will go down.
  4. Enter a trade size. Decide on how many CFD units you want to trade. The value of one CFD unit can vary depending on the instrument you’ve chosen to trade.
  5. Manage your risk. Select from a range of stop-loss orders, including guaranteed stop-loss orders (GSLOs). GSLOs work exactly the same as regular stop-loss orders except that for a premium, they guarantee to close you out of a trade at the price you specify regardless of market volatility or gapping. The premium is refunded in full if the GSLO is not triggered.
  6. Monitor your position. After placing your trade, monitor your open positions (including any stop orders or take-profit orders) to follow your real-time profit or loss.
  7. Close your position. If your trade is not automatically closed out as a result of a stop or take-profit order being triggered, close your trade when you are ready.

†Awarded 2021 Global Forex Best Forex Educational Resources, Best Forex Mobile Trading Platform/App, Best Forex Technology Provider, Best Forex Trade Execution, Best Forex Trading Experience, Best Forex Trading Platform, Best Forex Trading Support. Awarded 2020 Investopedia Best Overall Forex Broker and Best for Range of Offerings. Awarded 2020 Professional Trading Awards Best In-House Analysts and Best Trading Performance Tools. Awarded 2018 CSIA Customer Service Team of the Year – Small Team. Awarded 2018 Investment Trends Overall Client Satisfaction, Educational Materials & Programs, Platform Features, Customer Service, Value for Money

Disclaimer: CMC Markets is an order execution-only service. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.