Example: Selling EUR/USD | CFD | CFD Trading | Contracts for Difference

Please note that this example is taken from our Australian site. The products and rates described relate to the Australian market and all calculations are denominated in AUD.

Opening the position

You decide to go short on the Euro against the US dollar. On 2 June 2009, our quote is 1.4222/1.4223, and you sell 5 contracts (the equivalent of E500,000) at 1.4222.

The value of your position is E500,000 x 1.4222 = US$711,100. To open the position you supply a deposit of just 1% of the position. Your deposit is therefore 1% x US$711,100 = US$7,111. There is no commission to pay on FX trades.

Interest adjustments

While the position remains open, your account is debited or credited to the current Tom-Next rate. Tom/Next expresses in pips the difference between the interest paid to borrow the currency that is being notionally sold overnight, and the interest received from holding the currency that is being notionally bought overnight. An administrative charge not exceeding 0.3% per annum applies on either side of the current Tom/Next spread. This maximum charge will apply to both regular and mini-contracts.

Closing the position

On 8 June 2009, EUR/USD has fallen to 1.3811/1.3812, and you take your profit by buying 5 contracts at 1.3812. Your gross profit on the trade is calculated as follows:

Gross profit: US$20,500

To calculate the net result you also have to include interest adjustments.