### CFD Trade Example

### CFD Trade Example

Here we give an example of a CFD trade using the widely traded FTSE 100 index:

Let’s say that the FTSE is currently trading at a level of 7004.4/7005.4. A trader has the choice to either sell the FTSE index at the 7004.4 level, or buy at 7005.4. The trader in our example decides to buy £5 of the FTSE.

Before proceeding with the trade, the trader would like to calculate the nominal risk. This is the maximum loss this trader could incur if the FTSE 100 dropped from its current 7005.4 level to zero.

**To calculate nominal risk: **Level security is purchased at x amount bought (£)

Therefore, if the FTSE did decline from its current level to zero, the trader would incur a loss of £35,027 (7005.4 x £5).