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.
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: 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: 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.
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: 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: 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.
Commission
CFD share trades attract a commission charge for each trade. For Australian shares, the commission is $7 or 0.09% of the trade size.
To determine how much commission you would pay, multiply your position size by the applicable commission rate.
In the XYZ example above, the charge to open a buy position would be calculated as follows: 1,000 (units) x $50.02 (buy price) x 0.09% = $45.02
The charge to close the buy position would be calculated as follows: 1,000 (units) x $50.51 (sell price) x 0.09% = $45.46
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.
You can view your historic holding costs by clicking on the account menu and then the history tab.
View further information on how CFDs work and the benefits of CFD trading, such as going short and hedging physical shares.