CALCULATING PROFIT AND LOSS ON CFD ACCOUNT
In this section, we will show you how to calculate profits and losses on a fictitious DAX 30 CFD trade.
Example 1: Buying D30EUR
In this example, D30EUR is currently trading at levels 13171.6/13173.5. Let us assume that a trader wishes to buy 1 unit of the CFD, thinking that price will move upward. D30EUR has a margin rate of 3%, which means that the trader has to only deposit 3% of the position’s value as margin.
In this case, the trader’s position margin will be EUR3952, which is (3%*(10 euros * 13173.5 buy price)). However, if the price moves against the predictions, it is possible that the trader may end up losing more than the initial position margin of EUR3952.
Outcome A: Profitable Trade
If the trader’s prediction turns out correct and the price succeeds to rise over the next one hour to 13271.6/132735.5, then he can decide to close the position by selling at 13271.6, which is the new selling price.
The price has moved 98.1 points (13271.6-13173.5) in favor of the trader. This should be multiplied by the contract size per 1 lot (EUR10) to calculate his profit which is EUR981.
Example 2: Selling D30EUR
In this example, D30EUR is trading at 13171.6/13173.5. Let us assume that a trader wants to sell 1 CFD (units) because he thinks that the price will go down. D30EUR has a margin rate of 5% which means that he only has to put forward 5% of the total position’s value from his funds as a margin.
Here, the trader’s position margin will be EUR3951 (5% x (EUR10 x 13171.6 sell-price)). We note that if the price moves against the predictions of the trader, then it is possible to lose more than the initial position margin of EUR3951.
Outcome A: A profitable trade
If the trader’s prediction turns out correct and the price falls over the next days to 12171.6/12173.5, then the trader decides to close the trade by buying back at 12173.5, which is the new buy price.
Here the price has moved 998.1 points (13171.6 - 12173.5.) in his favor, thus we multiply this by the size of the position (EUR10 per point) to calculate the profit which is EUR9981.
Outcome B: A losing trade
Unfortunately, if the trader’s prediction turns out incorrect and the price of D30EUR rises over the next days to 13371.6/13373.5, he shall decide to cut his losses and buy at 13373.5, which is now the new buy price to close the position.
The price has moved 201.9 points (13171.6 – 13373.5) against him; multiply this by the size of the position (EUR10) to calculate his loss which is EUR2019.