You choose the size of your trade by selecting the number of contracts you want to buy. In share CFDs, for instance, one CFD is usually equivalent to one share, so to buy 100 shares of Barclays you’d buy 100 Barclays CFD contracts.
In forex, meanwhile, a single CFD lot for EUR/USD is equal to buying €100,000. Because forex movement is measured in the quote currency, which in this case is dollars, every point EUR/USD moves will see your €100,000 gain or lose $10 in value.
You can also sometimes open smaller positions using ‘mini’ contracts.
The importance of volatility
Keep in mind that a similar deal size could mean very different things to different markets. The UK’s FTSE 100, for example, will rarely move 300 points in a day and often moves less than 100 points. Italy’s main stock index, the FTSE MIB, meanwhile, regularly experiences 600 point swings in a single day.
Therefore, it’s vital to make sure you research how volatile your chosen market is before choosing your deal size.
Other points to consider
- Initial deposit – Your position’s size will also affect your initial deposit or margin; the bigger your bet/deal size, the more margin you’ll need to pay.
- Minimum bet size – Every market also comes with a minimum size, which will vary from market to market and from provider to provider. This depends on a combination of factors: the value of the market, how frequently it’s traded, and how volatile it is. For CFDs, the minimum size is usually one contract (or one mini contract).