CFD Trading Examples

For beginners, the concept of CFD trading can be a confusing and intimidating subject. But with the right training, education and practice, beginners will soon evolve into more knowledgeable and experienced CFD traders.

To help with the learning process, we have created some CFD trading examples that should help you gain a better understanding of how CFD trading works.

CFD Example 1 – a BUY Wall St 30 Index trade

In this example, the Wall St 30 index is trading at 34,000 – 34,002. Let’s say that you want to buy 5 units of this index because you believe it will increase in value. You open your buy trade at 34,002 points…

Outcome 1: Winning Trade

You were correct – the price of the Wall St 30 index rose over the past two days to 34,280 – 34,282. You decide it is time to exit the trade and sell at 34,280. That is an increase of 278 points (34,280 – 34,002), so your profit is 278 x 5 units = $1,390!

Outcome 2: Losing Trade

Unfortunately, you were wrong and the price of the Wall St 30 index has decreased in value to 33,880 – 33,882. You feel that the price isn’t going to increase anytime soon so decide to exit the trade. You close at 33,880 – a loss of 122 points. 122pts x 5 units = a loss of $610.

Trade chart analysis

CFD Example 2 – a BUY Bitcoin trade

In this example, you wish to open a Bitcoin trade as you think the price is going to rise. The price of Bitcoin is quoted as 50,020 – 50,040 on your broker’s platform. You buy 2 units of BTC at 50,040…

Outcome 1: Winning Trade

Two weeks later, you check the price of BTC and can see it has risen to 53,200 – 53,220. Excellent news, you were correct in your thinking! You decide it is time to close the trade and take the profit.

You exit at 53,200 – a profit of 3,160 points! Plus you bought 2 units so your profit is $6,320 (3,160 x 2 units)!

Outcome 2: Losing Trade

Bad luck – you speculated incorrectly and the price of Bitcoin has unfortunately plummeted to 46,990 – 47,010. That drop represents a decline of $3,050 and as you bought 2 units, you have made a loss of $6,100! Ouch.

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CFD Example 3 – a SELL Gold trade

In this example, you want to trade the price of Gold as you think its current price of 1,700.20 – 1,700.80 is overvalued. You decide to SELL 5 units of Gold at 1,700.20…

Outcome 1: Winning Trade

Three days later, you login to your broker platform and see that the price of Gold has dropped to 1,698.00 – 1,698.60. You were right! That price drop of $1.60 actually represents a 160 point movement as with Gold you are trading on the cent movement, not the dollar.

With a sell trade of 5 units, you profit is 160pts x 5 = $800 profit! Nice trade.

Outcome 2: Losing Trade

Uh oh – the price of Gold has increased to 1,702.20 – 1,702.80.. That is a $2.60 increase, which equates to a 260 point increase. You have just lost $1,300 (260pts x 5 units) – ouch!