EXPLAINED: Calculation for CFD Brokerage with Anheuser ExampleHow do I calculate the brokerage I'll pay on a local CFD trade?
You’ll need to calculate the brokerage you’ll pay to enter your trade and the brokerage you’ll need to pay to exit your trade.
We’ll first need to lay out all the necessary information to calculate what brokerages you’ll pay…
For this example, we’re going to use a trade example with Anheuser Busch InBev.
And we’ll use the brokerage of 0.30% leg in (entry) and 0.30% leg out (exit) to pay.
Here are all the specifics needed for this trade:
Portfolio value: R40,000
Trade: JSE:ANH
Type: Long (buy)
Brokerage rate in: 0.30%
Brokerage rate out: 0.30%
Entry: R1,184.00
Stop loss: R1,143.00
Take profit: R1,215.00
Calculation #1: Calculating your ENTRY brokerage with CFDs
Step #1: Know what your max portfolio risk is per trade
Max % risk = (Portfolio value X 2%)
= (R40,000 X 2%)
= R800
Step #2: Find out the rands risked in trade
Rands risked = (Entry – Stop loss)
= (R1,184.00 – R1,143)
= R41.00
Step #3: Calculate the number of CFD contracts to trade
No. CFDs = (Max % risk ÷ Rands risked)
= (R800 ÷ R41.00)
= 19.51
SIDE NOTE: We always round down the number of CFDs, so that we risk less than what we choose to risk instead of more.
Therefore, we will buy 19 CFDs in this specific trade.
Step #4: Calculate your ENTRY exposure for the CFD trade
Entry exposure = (Entry price X No. CFDs)
= (R1,184 X 19 CFDs)
= R22,496
Brokerage in = (Entry exposure X Broker rate in)
= (R22,496 X 0.30%)
= R67.48
This means, you’ll need to pay a brokerage of R67.48 in order to buy (go long) 9 Anheuser CFDs.
Now we can move onto the next brokerage leg.
Calculation #2: Calculating your EXIT brokerage with CFDs
Step #1: Work out your EXIT exposure for the CFD trade
Exit exposure = (Exit price X No. CFDs)
= (R1,215 X 19 CFDs)
= R23,085
Step #2: Calculate your brokerage leg out
Brokerage out = (Exit exposure X Broker rate out)
= (R23,085 X 0.30%)
= R69.25
Step #3: Calculate the total brokerage for the CFD trade
Total brokerage = (brokerage leg in + Brokerage leg out)
= (R67.48+ R69.25)
= R136.73
This means, if the trade hit your take profit level you would have ended up paying a total brokerage of R136.73 for your Anheuser CFD long trade.
