Notional and Point Explanation

Here, we provide a comprehensive guide on how to calculate the notional value and per-point value for CFD trades. Understanding these essential concepts will empower you to make informed decisions in your trading journey. Let’s dive in:

Notional Value of a CFD Trade: 

The notional value of a CFD (Contract for Difference) trade refers to the total value of the underlying asset that is being traded. To calculate it, you’ll need two key pieces of information: the contract size and the current market price of the asset.

Formula for Notional Value: Notional Value = Contract Size * Lots * Market Price

Example calculations for various CFDs with 1 lot traded:

a) EUR/USD:

Contract Size: 100,000 EUR (standard lot)

Market Price: 1.1800 USD/EUR

Notional Value = 100,000 * 1 *1.1800 = 118,000 USD

b) XAU/USD (Gold):

Contract Size: 100 oz (standard lot)

Market Price: $1,800.50 USD/oz

Notional Value = 100 * 1 * 1,800.50 = 180,050 USD

c) US30 (Dow Jones Industrial Average):

Contract Size: 1 index point (standard lot)

Market Price: 35,000 points

Notional Value = 1 * 1 * 35,000 = 35,000 USD

d) WTI/USD (Crude Oil):

Contract Size: 1,000 barrels (standard lot)

Market Price: $70.75 USD/barrel

Notional Value = 1,000 * 1 * 70.75 = 70,750 USD

Per-Point Value of a CFD Trade:

The per-point value, also known as the tick value, represents the change in the notional value for each movement of one point in the market price. It is crucial for managing risk and calculating potential profits or losses accurately.

Formula for Per-Point Value: Per-Point Value = Contract Size * Lots * Tick Size

Examples of Per-Point Value for 1 lot traded:

a) CFD EUR/USD:

Contract Size: 100,000 EUR (standard lot)

Tick Size: 0.0001 (1 pip)

Per-Point Value = 100,000 * 1 * 0.0001 = 10 USD per pip movement

b) CFD XAU/USD (Gold):

Contract Size: 100 oz (standard lot)

Tick Size: 0.10 (10 cents)

Per-Point Value = 100 * 1 * 0.10 = 10 USD per point movement

c) CFD US30 (Dow Jones Industrial Average):

Contract Size: 1 index point (standard lot)

Tick Size: 1.0

Per-Point Value = 1 * 1 * 1.0 = 1 USD per point movement

d) CFD WTI/USD (Crude Oil):

Contract Size: 1,000 barrels (standard lot)

Tick Size: 0.01 (1 cent)

Per-Point Value = 1,000 * 1 * 0.01 = 10 USD per point movement

Understanding the notional value and per-point value will empower you to manage your risk effectively and make more informed trading decisions. Remember to consider your risk tolerance, financial goals, and market analysis before engaging in any CFD trades. Happy trading!

CFD Instrument	Contract Size	Market Price (USD)	Notional Value (USD)	Calculations
EUR/USD	100,000 EUR	1.18000	118,000	Notional Value = Contract Size * Market Price
XAU/USD (Gold)	100 oz	1,800.50	180,050	Notional Value = Contract Size * Market Price
US30	1 index point	35,000.00	35,000	Notional Value = Contract Size * Market Price
WTI/USD (Oil)	1,000 barrels	70.75	70,750	Notional Value = Contract Size * Market Price
CFD Instrument	Contract Size	Tick Size	Per-Point Value (USD)	Calculations
EUR/USD	100,000 EUR	0.0001	10	Per-Point Value = Contract Size * Tick Size
XAU/USD (Gold)	100 oz	0.01	1	Per-Point Value = Contract Size * Tick Size
US30	1 index point	1	1	Per-Point Value = Contract Size * Tick Size
WTI/USD (Oil)	1,000 barrels	0.01	10	Per-Point Value = Contract Size * Tick Size

Table: Margin Requirements for CFD Trades (Leverage: 1:20)

CFD Instrument	Contract Size	Market Price (USD)	Notional Value (USD)	Margin Requirement (USD)	Calculations
EUR/USD	100,000 EUR	1.18	118,000	5,900	Margin Requirement = Notional Value / Leverage
XAU/USD (Gold)	100 oz	1,800.50	180,050	9,002.50	Margin Requirement = Notional Value / Leverage
US30	1 index point	35,000	35,000	1,750	Margin Requirement = Notional Value / Leverage
WTI/USD (Oil)	1,000 barrels	70.75	70,750	3,537.50	Margin Requirement = Notional Value / Leverage