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June 20, 2018

iFOREX, Here is an example of Trading on WTI Crude Oil CFD 'Calculations & Mechanism'

Here is how CFD trading works on iForex’s online platform.

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The iFOREX investment platform automatically calculates all necessary equations, but informed traders understand the detail necessary to carry out successful strategies.

As an example, let’s look at crude oil

Opening a deal size of 380 contracts of oil means that you are buying 380 x oil contracts.

What you will do on the platform?

Choose the instrument WTI oil
Choose your deal size 380 contracts
Choose direction Buy / Sell

With an investment of $200, you assume that the price of oil is going to strengthen, and you choose to buy oil.

Let’s say that in this example, the price of a single oil contract is $52.

*You don’t have to actually own these contracts in order to sell them later – in a CFD investment you can sell an instrument without actually owning it because you are, in fact, investing in the instrument’s price.

Example 1:

A click on the “BUY” button will allow you to purchase 380 x oil contracts, using leverage of approx. 100:1.

380 x 52 (ask price) = $19,760

REMEMBER: One of the main benefits of CFDs is that your investment is leveraged (this is the benefit that enables you to open large deals with a relatively small investment).

For crude oil, the maximum leverage is: 200.

Your maximum deal size if therefore: your investment x 200.

This allows you to maximize your potential profits.

To demonstrate the calculations we will continue to use the oil example

Let’s say the price of the oil moves up by 20 points from 52 to 52.20.

380 x 52 (ask price) = $19,760 *
380 x 52.20 (bid price) = $19,836 *
19,836 – 19,760 = 76 => The difference is worth $76

Example 2:

A click on the “BUY” button will allow you to purchase 760 x oil contracts, using leverage of approx. 200:1.

760 x 52 (ask price) = $39,520 *
760 x 52.20 (bid price) = $39,672 *
$39,672 – $39,520 = 152 => The difference is worth $152

This calculation will always give you the value of the difference in the quote currency (in this case, US Dollar).

REMEMBER: to succeed as an investor, it’s important to have the ability of calculating risks and potential profits. It is always advisable to be aware of these calculations before opening a deal.

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