Say the current market price of Brent Crude is $7240. We’re offering a buy price of $7241,25 and a sell price of $7238,75, due to the 2.5-point spread we wrap around the underlying price.
You think the price of Brent Crude will fall by the end of the day. So, you decide open a short CFD position for 1 CFD worth $ 10 per point of movement. As CFDs are leveraged, you’d only have to put down a 1.5% deposit to open this position – so you’d deposit $1.085,81 for an exposure worth $72.387,50 (7.238,75x10).
When you trade in a currency other than your base currency your profit or loss will be realised in that currency. In this case you’d convert dollars into Swiss Francs.
At the end of the month, the price of oil has fallen by 30 points, down to $7210 – with a buy price of $7211.25 and a sell price of $7208.75. So, you decide it’s time to close your trade – making a profit of $ 275 ([7238,75 – 7211,25] x $10).
However, if the price of oil increased by 40 points instead, you’d have lost $425 (42,5 x $10). Leverage amplifies your profit, but it also increases your risk.