Metals Examples
Metals are easy to trade with us: all deals are commission-free and we quote very narrow spreads. The example below takes you through trading Spot Gold, one of the most popular metal markets. Forwards on a wide variety of metals are also available.
Selling Spot Gold
Opening the position
It is 17 July 2011 and you expect the price of gold to fall after a recent rally in the price of the precious metal.
Our quote is 1596.0-1596.5 and you decide to sell two contracts at 1596 (one 100oz contract equates to $100 per dollar movement in the price of gold). There is no commission to pay on any of our Spot Metals.
Closing the position
The price moves up and down, but a few days later, on 21 July, the price of gold falls and at one point we are quoting 1585.0-1585.5. You decide to take your profit, buying two contracts at 1585.5. Of course, had the market moved in the opposite direction you could have lost more than your initial deposit, but in this example your gross profit is calculated as follows:
| Profit | |
|---|---|
| Opening level | 1596.0 |
| Closing level | 1585.5 |
| Difference | 10.5 |
| Profit: 2 contracts x $100 per point x 10.5 points = $2,100 | |
To calculate the overall result on the transaction you would also have to take into account the interest adjustments. The interest on your position is calculated daily, by applying the relevant interest rate to the daily closing value of the position.
Buying Spot Gold
Opening the position
It is 17 July 2011 and you expect the price of gold to rise, in line with a recent rally.
You want to limit your risk though, as prices have been volatile, so choose to make a Controlled Risk trade. Our quote is 1596.0-1596.5 and you wish to place place your Guaranteed Stop 20 points below.
You need to pay a Controlled Risk premium of 0.3 points to open your position, so you buy two contracts (one 100oz contract equates to $100 per dollar movement in the price of gold) at the offer price of 1596.5 plus the premium of 0.3 which equals 1596.8.
The maximum you can lose is $4000 (Opening level of 1596.8 - Closing level of 1576.8 x 2 contracts x $100 per point).
Closing the position
A few days later on 21 July, against your expectations the price of gold has fallen, but you stick with your trade, and on 24 July, gold reaches a record high above $1620 per ounce. At one point our quote is 1621.1-1621.6, and you sell two contracts to close at 1621.1.
| Profit | |
|---|---|
| Opening level | 1596.8 |
| Closing level | 1621.1 |
| Difference | 24.3 |
| Profit: 2 contracts x $100 per point x 24.3 points = $4,860 | |
To calculate the overall result on the transaction you would also have to take into account the interest adjustments. The interest on your position is calculated daily, by applying the relevant interest rate to the daily closing value of the position.
The Right Choice
- 7000 share CFDs and over 60 forex pairs
- 99.5% of trades executed in 0.1 seconds
- Spreads from just 0.8 pips on forex and 1 point on indices
