Forex trading example
With Forex trading your profit or loss is determined by the difference between the bid price and the offer price of the currency that you are trading. Here we use EURUSD as an example:
Open a position
The price of EURUSD Spot CFD is 1.4380 (Bid price) / 1.4382 (Offer price). You think the price is going up so you decide to buy 100,000 EURUSD at the offer price of 1.4382.
Margin
Your Total Margin Requirement is the number of Forex CFDs multiplied by Margin Percentage.
Forex CFDs have a 2% Margin Percentage. Your Total Margin Requirement to open this position is USD2,000 (USD100,000 x 2% = USD2,000).
Commission charge
You will pay USD0 Commission for this trade. CMC Markets charges no commission for buying and selling Forex CFDs.
The next day
You decided to hold the position overnight. The closing price for a EURUSD Spot CFD for the day was 1.4382, the same as your purchase price.
The next day, your position is closed at 1.4832 and reopened at 1.4832809, the difference being the Rollover Rate. The Rollover rate is variable, here is only for illustration purpose. As the EUR is the higher yielding currency, and you are long EUR, your account is credited USD8.09 [100,000 x (1.4832809-1.4382) = 8.09]
Following speculation of a US interest rate cut, the price of EURUSD Spot CFD the next day is 1.4480/82. Your position is marked to market, which changes your account balance from the previous night’s closing position.
Closing the position
You decide to close your position and sell 100,000 EURUSD Spot CFDs at the Bid price of 1.4480. We fill your order at this price.
(1.4480-1.4382) x 100,000 = USD980 profit.
You will pay USD0 commission for this trade.
Your P&L
In this example you opened a long position and closed at a greater price. After the relevant transaction costs you would have made USD988.09 in total. If the price had have moved in the opposite direction you would have made a loss.
