Opening a forex digital 100
For example, a forex digital 100 might ask you whether EUR/GBP will be above 0.8215 at midday. It has three hours left until it expires, and EUR/GBP is trading at 0.8206. You believe that there is a strong likelihood that it will end up above 0.8215, so you buy the digital 100 at its current price of 45.
You set your stake at the equivalent of £10 per point, making your total position worth £450. If EUR/GBP is above 0.8215 at midday then the digital 100 will settle at 100. Your position will now be worth £1000 and you will have made a £550 profit. If EUR/GBP is beneath 0.8215 at midday then the digital 100 will settle at 0, and you’ll lose your £450 stake.
The digital 100 price will change as its expiry date nears, reflecting the likelihood that the proposed outcome will arise. You don’t have wait for a digital 100 to expire before closing your position: you could exit the trade when the digital 100 is trading at 20, for instance, cutting your losses to £250 (as long as it then settles at zero).