Cryptocurrency trading example
To help you understand how to trade cryptocurrencies, we’ve complied an example of cryptocurrency trade and its possible outcomes.
CFD trading example: selling ether
You might decide to open a CFD trade on ether. In this example, you believe that the price of ether – the token of the Ethereum network – is going to fall in value, and decide to go short by selling ether against the US dollar (ether/USD).
The current market price is 201, but you would sell at 200.3 – slightly below the market price, due to the spread. You decide to sell 5 contracts (each equivalent to 1 ETH) to open a position at this price.
If your prediction is correct
If you were right, and the value of ether fell against the US dollar, your trade would profit. Let’s say that the new market price is 150, you could close your position and take your profit by buying 5 contacts to close your position at the buy price of 150.7, which is slightly higher than the market price due to the spread.
Because the market has moved 49.6 points in your favour, the profit on your trade would be calculated as follows: 5 x 49.6 = $248.
If your prediction is incorrect
However, if the value of ether rose against the US dollar, your position would be closed at a loss. Let’s say that you decide to exit the trade after the market rose by 15 points to 215 – so buy back 5 contracts at the buy price of 215.7. This would mean the loss to your position was 5 x 15.4 = $77.