Find out how CFDs work
CFDs work by mimicking the underlying market. So, while you can mimic a traditional trade that profits as a market rises in price, you can also open a CFD position that will profit as the underlying market decreases in price.
Say, for example, that you buy 5 FTSE 100 contracts when the buy price is 7500. A single FTSE 100 contract is equal to a £10 per point, so for each point of upward movement you would make £50 and for each point of downward movement you would lose £50 (5 contracts multiplied by £10).
As always, possible profits and losses will be magnified because these will be based on the full 7500 position, not the margin amount.
If you sell when the FTSE 100 is trading at 7505, your profit would be £250
£250 = (5 x 10) x (7505 - 7500)
If you sell when the FTSE 100 is trading at 7497, your loss would be £150
-150 = (5 x 10) x (7497.0 - 7500.0)
