Trade CFDs long or short
With CFD trading, your profit or loss is determined by the difference between the buy price and the sell price of the financial instrument you’re trading.
For our long and short trade scenarios, let’s use fictional company, Pilbara Iron Limited (PIL).
PIL is trading at $14.98/15.00
| You think the price is going to fall. You decide to go short. You sell 1,000 PIL share CFDs at $14.98, which gives you a position size of $14,980 … 1,000 x $14.98 = $14,980 |
You think the price is going to rise. You decide to go long. You buy 1,000 PIL CFDs at $15.00, which gives you a position size of $15,000 … 1,000 x $15.00 = $15,000 |
Your margin requirement
| Because the margin requirement for this share CFD is 5%, only $749 is allocated from your trading account as a deposit. $14.980 x 5%=$749 If the share price moves against you, you may lose more than this $749 initial margin. |
Because the margin requirement for this share CFD is 5%, $750 will be allocated from your account against this trade as initial margin … $15,000 x 5% = $750 If the share price moves against you, you may lose more than this $750 initial margin. |
Your position size
| You now hold a position of 1,000 PIL share CFDs with a value of $14,980. | You now hold a position of 1,000 PIL share CFDs with a value of $15,000. |
Later the same day …
| The market falls 98 cents in your favour. You decide to close out your position and make a profit.
You buy 1,000 PIL share CFDs at $14.00 to close your position, resulting in revenue of $980. |
The PIL share price has risen to $15.25/15.27. PIL has risen by 25 cents. You decide to close your position and make a profit.
You sell 1,000 PIL share CFDs at $15.25 to close your position, resulting in revenue of $250. 25 cents x 1,000 CFDs = $250 revenue |
Your commission charges
| You need to deduct commission charges to calculate net profit. If you didn’t buy and sell the position on the same trading day, you’ll also need to add any financing adjustment. Trading Australian share CFDs with us attracts a commission charge of 0.1% with a minimum charge of $7. To work out commission, multiply your position size by the commission charge. |
Your profit and loss
| After deducting commission charges from the total revenue, you’ve made a profit of $219.75.
If the market had moved against you (that is, if the share price of PIL had gone up) by 25 cents, you would have lost $250 plus commission. |
A commission charge equalling $15.25 will also apply to the closure of the trade. After deducting $15.25 from the total revenue, you’ve made a profit of $219.75.
If the market had moved against you (that is, if the share price of PIL had dropped) by 25 cents, you would have lost $250 plus commission. |