To explain how CFD trades work, here are some examples of long and short positions together with an example of how a trade with a Guaranteed Stop Loss can work.
In each of these examples, the figures used for interest rates and Notional Trading Requirements (NTR) are indicative. Interest rates and NTR change from time to time and from market to market. You should always read the market information sheets for your account before trading CFDs.
A long CFD position on FTSE 100
Opening Trade
You decide to buy the FTSE 100 as you have a strong feeling that the index will rise. A Selftrade CFDs trader quotes you 5342/5346 and you buy 10 CFDs at 5346.
| Price of FTSE 100 CFD | 5346 |
| Number of CFDs | 10 |
| Value of CFDs | £53,460.00 |
| NTR Required (7.5%) | £4,009.50 |
Daily Financing
On a nightly basis you pay financing on open long positions based on Sterling LIBOR. Your financing rate is LIBOR + 1.5%. Assuming this equates to a financing rate of 6.0% (4.5% + 1.5%) and the closing price for the day is 5362. You pay 10 x 5362 x 6.0% /365 = £8.81 for holding the position overnight. This will be debited from your account on the next trading day.
Closing Trade
7 days later the FTSE 100 CFD is quoted 5405/5409 and you sell 10 CFDs at 5405.
| Price of FTSE 100 CFD | 5405 |
| Number of CFDs | 10 |
| Closing Value of CFDs | £54,050.00 |
| Opening Value of CFDs | £53,460.00 |
| Profit on Trade | £590.00 |
| Financing (7 days) | (£61.67) |
| Overall Profit on Trade | £528.33 |
Opening Trade
You think ABC Plc is over priced so you decide to go short with a view to the market falling and being able to buy back the CFD at a lower price to make a profit. From the Selftrade CFDs trading platform, you see that the quote for ABC Plc is 825/826 and you decide to sell a CFD on 1000 shares at 825p.
| Price of ABC Plc | 825p |
| Number of shares | 1,000 |
| Value of shares | £8,250.00 |
| Commission (0.15% minimum £12.50) | £12.50 |
| NTR Required (10%) | £825.00 |
Daily Financing
On a nightly basis you receive financing on open short positions based on Sterling LIBOR. Your financing rate is LIBOR - 2.5%. Assuming this equates to a financing rate of 2.0% (4.5% - 2.5%) and the closing price for the day is 833p. You pay 1000 x 833 x 2.0% /365 = £0.46 for holding the position overnight. This will be credited to your account on the next trading day.
Closing Trade
3 days later the ABC Plc is quoted 855/857, buy back the CFD at 857.
| Price of ABC Plc | 857p |
| Number of shares | 1,000 |
| Value of shares | £8,570.00 |
| Stamp duty | £0.00 |
| Commission (0.15% minimum £12.50) | £12.86 |
| NTR required (10%) | £825.00 |
| Closing value | £8,570.00 |
| Opening value | £8,250.00 |
| Loss on trade | (£320.00) |
| Total commission | (£25.36) |
| Financing (3 days) | £1.38 |
| Overall loss on the trade | (£343.98) |
Selling the Wall Street CFD with a Guaranteed Stop Loss
Opening Trade
You decide to sell the Wall Street CFD. A Selftrade CFDs trader quotes you 10026/10032 and you sell 10 CFDs as a Limited Risk trade. Your position is opened at 10026 - 4 = 10022 (4 is the Guaranteed Stop Loss premium). You decide to set your stop guaranteed at 10092 (which is 70 points away from your opening level).
| Price of Wall Street CFD | 10022 |
| Number of CFDs | 10 |
| Value of CFDs | $100,220.00 |
| NTR Required (the maximum loss) | $700.00 |
If the trade had been executed without a stop loss the NTR would have been 7.5% of the contract value - $7,516.50.
Closing Trade
Later that same day, the Selftrade CFDs price gaps higher to stand 10152/10158. Your position is automatically closed at 10092.
| Price of Wall Street CFD | 10092 |
| Number of CFDs | 10 |
| Value of CFDs | $100,920.00 |
| Closing Value of CFDs | $100,920.00 |
| Opening Value of CFDs | $100,220.00 |
| Overall Loss on Trade | ($700) |
| Loss without a Guaranteed Stop | (10158 - 10022) x 10 = ($1,360.00) |
This is your maximum loss regardless of what happens to the market. Your profits are not limited by a Guaranteed Stop Loss.
Examples of specific investments used in our material should not be taken as an advice to purchase or to sell a particular investment.
Intraday data is delayed by 15 minutes.
| Name | Latest | Var |
|---|---|---|
| FTSE 100 | 5,350.05(c) | +1.59% |
| FTSE 250 | 10,472.48(c) | +0.93% |
| DOW INDUSTRIALS | 12,529.75(c) | +0.27% |
| HONG KONG HANG SENG INDIC | 18,666.40 | +0.00% |
| Nikkei 225 | 8,608.98 | +0.53% |
| Name | Latest | Var |
|---|---|---|
| RANDGOLD RES. | 5,170.00(c) | +8.00% |
| VEDANTA | 999.50(c) | +5.04% |
| PRUDENTIAL | 686.00(c) | +3.39% |
| BP | 407.00(c) | +3.33% |
| BG GROUP | 1,269.00(c) | +3.21% |
| Name | Latest | Var |
|---|---|---|
| REXAM | 393.90(c) | -1.33% |
| ABDN.ASSET.MAN. | 238.40(c) | -1.20% |
| IMI | 894.00(c) | -1.16% |
| HARGREAVES LANS | 466.10(c) | -0.68% |
| EVRAZ | 308.70(c) | -0.61% |
| Name | Latest | Var |
|---|---|---|
| AVIVA | 268.00(c) | +1.55% |
| BP | 407.00(c) | +3.33% |
| TESCO | 308.25(c) | +1.20% |
| LLOYDS GRP. | 26.91(c) | +1.49% |
| VODAFONE GRP. | 171.70(c) | +1.24% |
| Name | Latest | Var |
|---|---|---|
| BPC | 6.91(c) | -7.25% |
| LLOYDS GRP. | 26.91(c) | +1.49% |
| WEST AFRIC MIN | 65.75(c) | -3.66% |
| GULF KEYSTONE | 202.00(c) | +2.02% |
| ROYAL BANK SCOT | 21.44(c) | +1.90% |
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