Making a CFD Trade

Buy / Go Long:

This refers to entering a trade on the speculation that the price or value of the underlying market will rise.

Sell / Go Short:

This refers to entering a trade on the speculation that price or value of the underlying market will decline. The act of selling is not strictly regulated in the CFD market as it is in traditional markets. You can sell to get into a trade just as easily as you can buy. Note: during extreme market conditions, restrictions may be imposed.

Stake:

This represents how many CFDs in a particular market you are trading. (Note: buying/selling a stake is the same as buying/selling a CFD.) Buying one stake or one CFD means that each tick will be worth one in whatever the base currency of the underlying market is. For example: if you bought five Spot Gold CFDs, each tick will be worth USD$5 since U.S. dollars is the base currency of the underlying Spot Gold market.

Tick:

This represents one unit of movement in CFDs. The size of a tick varies from .01 to 1 for the CFDs offered by GFT. View the market information sheets for complete details on tick size.

Underlying Market:

The actual market on which you are trading…i.e. trading a Spot Gold CFD means you are speculating on the price movement in the actual Spot Gold market. Knowing the base currency of the underlying market is important as that is the currency in which your profits/losses will be reflected.

Quote:

This represents the current buy and sell prices for a particular market. Quotes are shown as: sell price – buy price. For example, if 213.7 – 213.9 is the quote: 213.7 is the sell price and 213.9 is the buy price.

CFD TRADING EXAMPLE 1:
SPOT GOLD

Let's say you learn that the Gold market has been active as speculators continue to push up the price – you believe there is still room for further rises. The GFT quote for Spot Gold is 927.1 - 927.6

You buy 20 Spot Gold CFDs at 927.6.

Remember:

1. The tick size for Spot Gold is 0.1, so if it moves from 927.6 to 928.6, that is 10 "ticks."
2. The base currency of the underlying Spot Gold market is U.S. dollars, so this is what you will be trading in.

By the following day, you noticed that the price has risen yet further and the GFT quote is 950.1 – 950.6.

You decide to close your position and sell at 950.1.

This realises a profit of (9501-9276) X your stake of 20 = USD$4500

Night Finance Adjustment

As you hold the position overnight, a finance adjustment is made to your account.

This is calculated as follows: f = (s x p x r) / d where:

• f = daily financing charge
• s = number of CFDs (20)
• p = closing price as determined by GFT (9501 basis the GFT quote at 17:00 New York Time)
• r = relevant overnight LIBOR rate, PLUS 300 basis points for long positions, or MINUS 300 basis points for short positions, e.g. (4.50% + 3.00%) = 7.50%
• d = number of days, i.e. 360 for Spot Gold

Long (buy) trade positions are debited the daily financing charge.

Short (sell) positions are credited the daily financing charge.

So, the finance adjustment will be a debit to your account, equal to:

(20 x 9501 x 7.50%) / 360 = 39.59

Note: All rollovers and associated finance adjustments are carried out at 10pm London Time.

CFD TRADING EXAMPLE 2:
SPOT BRENT CRUDE OIL

You think the price of Brent Crude Oil is set to decline due to a decrease in demand. The current GFT quote is 6408 – 6413.

You decide to sell 15 Spot Brent Crude Oil CFDs at 6408.

Things to note:

1. The tick size for Spot Brent Crude Oil is 1, so if it moves from 6408 to 6418, that is 10 "ticks."
2. The base currency of the underlying Brent Crude Oil market is U.S. dollars, so this is what you will be trading in.

By the following day, you notice that the price has risen and the GFT quote is 6428 – 6433. You decide to close your position and buy at 6433.

This realises a loss of (6433-6408) X your stake of 15 = USD$375.

Night Finance Adjustment

As you hold the position overnight, a finance adjustment is made to your account.

This is calculated as follows: f = (s x p x r) / d where:

• f = daily financing charge
• s = number of CFDs (15)
• p = closing price as determined by GFT (6433 basis the GFT quote at 17:00 New York Time)
• r = relevant overnight LIBOR rate, PLUS 300 basis points for long positions, or MINUS 300 basis points for short positions, e.g. (4.50% - 3.00%) = 1.50%
• d = number of days, i.e. 360 for Spot Brent Crude Oil

Long (buy) trade positions are debited the daily financing charge.

Short (sell) positions are credited the daily financing charge.

So, the finance adjustment will be a debit to your account, equal to:

(15 x 6433 x 1.50%) / 360 = 4.02

Note: All rollovers and associated finance adjustments are carried out at 10pm London Time.