Profit and Loss for CFDs positions
How is PnL calculated for a CFD position?
The Profit and Loss (PnL) for CFDs is calculated based on the difference between the entry price (the price at which you open a position) and the exit price (the price at which you close the position). The formula for calculating PnL for a CFD trade depends on whether the position is long (buy) or short (sell).
Open positions
Let’s assume that the trade of 100 units was opened when the ask price was $113 and the bid price was $111. Right now, the ask price is $118 and the bid price is $114.
Long position unrealised PnL
($114 - $113) × 100 = $100.
Short position unrealised PnL
($111 - $118) × 100 = -$700.
Closed trades
Let’s assume that the trade of 100 units was opened when the ask price was $113 and the bid price was $111. The trade was then closed when the ask price was $108 and the bid price was $93.
Long position realised PnL
($93 - $113) × 100= -$2,000.
Short position realised PnL
($111 - $108) × 100 = $300.
The PnL above doesn’t account for trading fees or overnight fees you might need to pay to trade or keep your position open overnight.
PnL is calculated for the whole position you open with leverage. Let's assume that, in the above example for a long position, it had been opened for an asset with a 0.2 margin requirement.
This means that, to open a position, you would need to put in $112 (mid-price) × 100 (units) = $11,200.
With a 20% margin requirement, you would need to provide $11,200 × 0.2 = $2,240 as your initial margin.
Even though the asset's price only changed from $111 to $93, the loss you experienced is significant. With a realised PnL of -$2,000, and considering that you initially invested $2,260 as a margin, the loss of $2,000 is nearly all of your invested margin.
An unrealised loss will reduce your investing power while the position is open. However, any unrealised profit can increase your ability to invest, allowing you to reinvest those gains.