Forex trading examples

Your profit or loss is determined by the difference between the entry and exit price on a trade. Remember that prices are always quoted with the sell price on the left and the buy price on the right. You enter a trade via one and exit via the other.

Example: 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 5%, which means that you only have to deposit 5% of the position’s value as position margin. In this example, your position margin will be “$2,501 (5% 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 $2,501.

Outcome 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 49 cents (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: 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 51 cents (50.02 - 49.51) against you. Multiply this by the quantity (1,000 units) to calculate your loss which is $510.

Example: 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 5% which means that you only have to put forward 5% of the total position’s value from your own funds as position margin. In this example, your position margin will be $2,500.50 (5% x (1,000 (units) x 50.01 (sell price)).

Remember that if the price moves against you, it is possible to lose more than your initial position margin of $2,500.50.

Outcome 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 49 cents (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: 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 51 cents (50.52 - 50.01) against you. Multiply this by the quantity (1,000 units) to calculate your loss which is $510.

Holding costs

If you hold any position after 17:00 New York time, you will be charged a holding cost, or if the position has a fixed expiry the cost is built into the price of the product.

We calculate the holding rate applicable to the holding cost based on the interbank rate of the currency in which the product 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.

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CFD trading can result in losses that exceed your deposits. Ensure you understand the risks.