The Possible Outcomes in CFD Trading Australia
Assuming that you made the right expectations when you thought that the price in CFD trading Australia goes up the following week to 110/112. You then decide to sell the asset that you bought at 110 AUS dollars which is also the current price. You then have to shell out a commission upon consuming a trade. In this scenario, about 11 AUS dollars will be charged to you after you sell the asset. This is based on the 10 percent charge on the whole size of the trade.
Turning a profit with CFD trading Australia
If the initial price is 100 dollars and the new opening price is 110 dollars, then you have obviously seen a 10 dollar increase in the price of the asset. If you bought 10,000 units, you need to multiply this by the current opening price so you can arrive at a profit of 1,000AUS dollars. Then you will have to deduct the commission charges of 21 dollars – 10 dollars at the opening and 11 dollars upon closing and you will come up with a CFD trading Australia profit for AUS dollars.
The second outcome is a loss
The most obvious way in which you are going to suffer a loss in CFD trading Australia is if you make a mistake in predicting the direction of the price of the asset. Here is what happens. The price drops to 93/95.In the event that you predict that the price of the asset will go on in its downward direction you decide to sell at 93 dollars so that you can minimize your loss. In this case, a commission will still be implemented once you exit the trade. The commission would total to 9.30 AUS dollars. This was derived from the equation 10,000 units x 93 dollars = 9,300 x .10 percent.
In this case, the price has gone down from an original opening of 100 AUS dollars to its current selling price at 93 dollars for a difference of 7 dollars. You can calculate for your total loss by multiplying 7 dollars by 10,000 which is the amount of units you purchased from last week. This will total to 700 dollars. To this you will have to add the two commission charges of 10 dollars for the opening and 9.3 for the closing for a total of 19.30. Add this to the 700 dollars and your total loss will be 719.30.
A profitable outcome
Just like any other form of trading, one can earn a profit from CFD trading Australia even when the prices are on a downward direction. This can be done if the investor goes short on the trade after he correctly predicts that the price will go down. The next thing that you will have to do is to buy the trade later on at a lower price. This will result in a profit. However, if the price goes on the opposite direction, you will incur a loss. The bad thing is that one loss may surpass the amount that you deposited.
One of the safest things that you can do to prevent or minimize losses is to hedge your shares by using a CFD trading Australia. This can be done if you have made an investment of shares through a different broker and you expect these shares will drop in value. If you sell these shares as CFDs, you can profit from the CFDs so you can zero out any loss you have incurred.