CFD trading example
With CFD trading your profit or loss is determined by the difference between the buy price and the sell price of the financial instrument that you are trading. Imagine this scenario about fictional industrial company called ABC Singapore Ltd (ABC):
A long trade
Placing a trade
ABC Singapore Ltd is trading at 4.11/4.12. You think the price is going to rise in value so you decide to go long and buy 1000 ABC CFDs at 4.12
3,000 CFDs at S$4.12 giving you a position size of S$12,360 (3,000 x S$4.12 = S$12,360)
Margin
The margin requirement with CMC Markets for ABC is 15%, therefore S$1,854 will be allocated from your account against this trade as initial margin.
S$12,360 x 15% = S$1,854
Remember if the share price moves against you, it is possible to lose more than this S$1,854 initial margin.
Commission charge
Equity CFDs attract a commission charge of 0.15% with a minimum charge of S$15. To determine how much commission you would pay, you multiply your position size by the commission charge.
In this example the charge is S$18.54 (S$12,360 x 0.15% = S$18.54)
Your open position
You now hold a position of 3,000 ABC CFDs with a value of S$12,360.
Later that day you notice that the ABC share price has risen to 4.18/4.19. This would mean that your previous assumption that the price would go up was right. You chose to close your position and sell at S$4.18.
Closing the position
You originally bought at S$4.12 and sold at S$4.18 which means ABC rose by S$0.06.
S$0.06 x 3,000 CFDs = S$180 revenue.
A commission charge of 0.15% will also apply to the closure of the trade, equalling S$18.81.
Your P&L
After deducting the commission charges from the total revenue you realize a profit of S$142.65
Had the market moved against you (i.e. the share price of ABC had fallen in value) by 6 points you would have lost S$180 plus commission.
