Currency trade examples
Buy Example (GBP/AUD)
The Bank of England is meeting in a few days and you feel they may increase their interest rates due to current inflationary pressure. As such you think the pound will strengthen on the back of this as it becomes more attractive due to its higher interest potential.
Enter Trade: In this quote panel the price of 1 British Pound (GBP) is equivalent to 1.59883 Australian Dollars (AUD). You therefore decide to buy £5,000 and in doing so simultaneously sell AUD 7,994.15.
Deposit: Using maximum leverage of 2% you will only need to deposit £100 (£5,000 x 2% = £100) to take out this position. Please be aware that using margin means you can lose more than your initial deposit. The CFD trading software will automatically convert this into the equivalent amount in Singapore dollars using the current spot rate between SGD and GBP. Therefore your deposit will be around SGD 198 (100 x 1.9800 - GBP/SGD rate).
Interest Cost: If you hold the position past 17:00 New York time your account will be debited or credited at the prevailing 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.
Close out Trade: The Bank of England do indeed raise interest rates and GBP strengthens against the AUD to 1.65000 and you decide to sell to take your profit. Simply click the close out X in the accounts menu and this will automatically close out the trade by selling £5,000 and buying back AUD 8,250 (5,000 x 1.65000 = AUD 8,250)
Profit Scenario: Your initial AUD 7,994.15 has now turned into AUD 8,250, meaning you have made a profit of AUD 255.85. The Next Generation software will automatically convert this for you at the prevailing rate so your overall profit in Singapore dollars is approximately SGD 330.56 (AUD 255.85 x 1.29200 AUD/SGD rate). To make it even easier when your trade is live, the Positions tab under Accounts Summary will always show you your profits in your local currency.
Loss Scenario: If the pound had decreased in value due to there being no interest rate rise for example, and the value of the GBP/AUD fell to 1.55000, by closing the position you would only been able to buy back AUD 7,750 (5000 x 1.55000 GDP/AUD rate) meaning a loss of AUD 244.15 or SGD 315.44 (AUD 244.15 x 1.29200 AUD/SGD rate)
Sell Example (USD/JPY)
Unemployment figures in the US (Non-Farm Payrolls) are being released soon and you think the news is not going to be positive. You therefore feel that the value of the US dollar is going to decline against a stronger Japanese economy and you would like to profit from this move.
Enter Trade: In this quote panel the price of 1 US Dollar (USD) is equivalent to 77.450 Japanese Yen (JPY). You therefore decide to sell US$10,000 and in doing so simultaneously buy ¥774,500 (10,000 x 77.450).
Deposit: Using maximum leverage of 2% you will only need to deposit US$200 ($10,000 x 2% = $200) to take out this position. Please be aware that using margin means you can lose more than your initial deposit. The CFD trading software will automatically convert this into the equivalent amount in Singapore dollars using the current spot rate between SGD and USD. Therefore your deposit will be around SGD 242 (200 x 1.2100 - USD/SGD rate).
Interest Cost: If you hold the position overnight past 17:00 hours New York time your account will be debited or credited at the prevailing 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.
Close out Trade: The Unemployment figures do disappoint and the US Dollar against the Yen weakens to 75.000 and you decide to buy to take your profit. Simply click the close out X within the accounts menu and this will automatically close out the trade by buying $10,000 and selling ¥750,000 (10,000 x 75.000 = 750,000).
Profit: You initially received ¥774,500 but subsequently returned ¥750,000 so you have made a profit of ¥24,500. The Next Generation software will automatically convert this for you at the prevailing rate so your overall profit in Singapore dollars is SGD 373.48 (¥24,500 ÷ 65.600 SGD/JPY rate). To make it even easier when your trade is live, the Positions tab will always show you your profit in your local currency.
Loss Scenario: If the US Dollar had increased in value due to positive employment figures for example, and the value of the USD/JPY rises to 77.750, by closing the position you would have had to return ¥777,500; which represents a shortfall of ¥3,000 (¥774,500 – ¥777,500). This would be a loss of SGD 45.73 (¥3,000 ÷ 65.600 SGD/JPY rate) and this would automatically be calculated for you by the Next Generation platform.