Key Takeaways
- We demonstrate CFD trading example with three markets: shares, forex, and indices, covering both buy and sell paths, cost components, and step by step P&L calculation.
- Share CFD example: buy 1,000 JPM at 1,600p with 5% margin. Deposit required is £800. A rise to 1,625p gives £250 gross and £217.75 net after commission.
- Forex example: sell 1 lot EURUSD at 1.1000, exit 1.0950. Result is 50 pips × $10 per pip = $500, with margin about €3,333 at 1:30 leverage.
- Index example: buy 10 S&P 500 contracts at 4,500. A 20 point move equals $200 when contract value is $1 per point per contract.
- Costs matter: shares often pay commission, forex and indices use spread. Holding overnight adds financing that reduces returns; five nights at 7.5% costs about £16.40 in the share example.
- Risk management is essential: use stop loss and take profit, keep free equity to avoid margin closeout, and remember leverage amplifies both gains and losses.
- P&L basics: profit or loss = (exit − entry) × units or contract value, then subtract all costs.
Real World CFD Trading Examples: Shares, Forex and Indices
To make the workflow clear, the article covers three active markets: Shares, Forex, and Indices. Each shows how to open a trade, account for costs, and read results.
Typically pay with commission.
Typically pay with spread.
Typically pay with spread.
The Foundations of a CFD Trade
Every trade rests on three pillars that govern capital needs and protection.
1. Margin and Leverage
Margin is the deposit to open and maintain a leveraged position. It enables large exposure with less capital but you must keep enough free equity or face margin closeout.
2. Commissions and Spreads
CFD brokers earn through commission or spread. Shares often use commission. Forex and indices usually price the cost in the spread, the gap between buy and sell.
3. Risk Management Tools
Use stop loss and take profit orders to automate exits. Stops cap losses and take profits secure gains at target prices.
Example 1: Buying Share CFDs (Commission Model)
Share CFDs often mirror the stock. In this example you pay commission to enter and exit.
The Trade Setup
Buy 1,000 units of JP Morgan Chase at 1,600p with a stop loss at 1,550p.
| Entry Price | 1,600p (£16.00) |
| Position Value | £16,000 |
| Margin (5%) | £800 deposit required |
Scenario A: The Profit Outcome
Price rises to 1,625p and hits the target.
| Item | Calculation | Amount |
|---|---|---|
| Gross Profit | (1,625 − 1,600) × 1,000 | + £250.00 |
| Commission Costs | Open and close fees | − £32.25 |
| TOTAL NET PROFIT | Final result | = £217.75 |
Example 2: Selling Forex CFDs (Spread Model)
Forex usually has no separate commission. The cost is in the spread.
The Trade Setup
You expect Euro to weaken against Dollar. Open a sell position for 1 standard lot at 1.1000.
- Market Price: 1.1000
- Trade Size: 1 lot (100,000 units)
- Margin: €3,333 (at 1:30 leverage)
The Result
Price drops to 1.0950 and the take profit order triggers.
| Item | Calculation | Amount |
|---|---|---|
| Entry Level | 1.1000 | - |
| Exit Level | 1.0950 | - |
| TOTAL PROFIT | 50 pips × $10 per pip | = $500.00 |
Example 3: Trading the S&P 500 Index
Index CFDs let you trade the direction of a whole market with a single instrument.
The Trade Setup
Expect a rise and buy 10 contracts of the S&P 500 at 4,500.
If price rises to 4,520: 20 points × 10 contracts × $1 = $200 profit
Example 4: The Hidden Cost of Holding Overnight
If you hold a trade across days you pay overnight financing on leveraged exposure.
Revisit the share example where you bought £16,000 of stock and hold it for 5 nights.
| Annual Interest Rate | 5% base + 2.5% markup = 7.5% |
| Daily Cost | (£16,000 × 7.5%) / 365 = £3.28 per day |
| Total for 5 Days | − £16.40 |
Key point: If the trade made £217.75, after 5 days the take home profit drops to £201.35. Always include time in your plan.
Calculating Profits and Losses
CFD trading becomes clear once you see the steps. Profit or loss equals the difference between exit and entry price multiplied by units or contract value, then adjusted for all costs.
Learn more about CFD trading for beginners.
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