Forex trading examples

To help understand the process of trading forex, view our CFD examples below, which take you through both buying and selling scenarios.

CFD trading example 1: buying EUR/USD

EUR/USD is trading at 1.1151/1.1152.

You decide to buy €50,000 because you think the price of EUR/USD will go up. EUR/USD has a tier 1 margin rate of 2%, which means that you only have to deposit 2% of the total position’s value as position margin. Therefore, in this example your position margin will be US$1115.15 (2% x (€50,000 x 1.11515)) or S$1527.76, assuming an exchange rate of 1.3700.

Remember that if the price moves against you, it is possible to lose more than your initial position margin of US$1115.15 / S$1527.76.

Outcome A: winning trade

Your prediction was correct and the price rises over the next hour to 1.1209/1.1210. You decide to close your long trade by selling at 1.1209 (the current sell price).

The price has moved 57 points (1.1209 - 1.1152) in your favour.​

Your profit is ((€50,000 x 1.1209) - (€50,000 x 1.1152)) = US$285​ (or S$390.45) 

Outcome B: losing trade

Unfortunately, your prediction was wrong and the price of EUR/USD drops over the next hour to 1.1095 / 1.1096. You feel the price is likely to continue dropping, so to limit your losses you decide to sell at 1.1095 (the current sell price) to close the trade.

​The price has moved 57 points (1.1152 - 1.1095) against you.

Your loss is ((€50,000 x 1.1152) - (€50,000 x 1.1095)) = -US$285 (or S$390.45)​

CFD trading example 2: selling EUR/USD

EUR/USD is trading at 1.1151/1.1152.

​Let's assume poor German manufacturing data indicates that the euro is likely to fall against the US dollar in the coming days. You decide to sell €50,000 because you think the price of EUR/USD will go down.

EUR/USD has a tier 1 margin rate of 2%, which means that you only have to deposit 2% of the total position’s value as position margin. Therefore, in this example your position margin will be US$1115.15 (2% x (€50,000 x 1.11515)), or S$1527.76, assuming an exchange rate of 1.3700.

Remember that if the price moves against you, it is possible to lose more than your initial position margin of US$1115.15 / S$1527.76.

Outcome A: winning trade

Your prediction was correct and EUR/USD drops over the next hour to 1.1101 / 1.1102. You decide to close your short trade by buying at 1.1102 (the current buy price).

The price has moved 49 points (1.1151 - 1.1102) in your favour.​​

Your profit is ((€50,000 x 1.1151) - (€50,000 x 1.1102)) = US$245, or S$335.65.​

Outcome B: losing trade

Unfortunately, your prediction was wrong and the price of EUR/USD rises over the next hour to 1.1199 / 1.1200. You feel the price is likely to continue rising, so to limit your losses you decide to buy at 1.1200 (the current buy price) to close the trade.

​​The price has moved 49 points (1.1200 – 1.1151) against you.

Your loss is ((€50,000 x 1.1151) - (€50,000 x 1.1200)) = -US$245, or -S$335.65.​​​

Holding costs

If you hold your position past 5pm New York time , your account will be debited or credited at the prevailing holding rate. If you have bought a higher yielding currency you will generally receive interest; if you have bought a lower yielding currency you will generally be charged interest.

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