Markets and Contract Structures · CFDs Trading Guide

Currency pairs contain two currencies, while your account can use a third. Follow each unit through the calculation before comparing profits or risk.

Read base and quote currencies

In EUR/USD, the quote states dollars per euro. A long position buys exposure to euros relative to dollars. A short position takes the opposite relationship. A provider may express size as units, lots or contracts, so translate the ticket into the actual base currency amount before calculating sensitivity.

Calculate a pip value

For a 10,000 euro position in EUR/USD, a conventional 0.0001 price change is $1. A move from 1.0800 to 1.0830 is 30 pips and produces $30 on a long position before costs. Many yen pairs use a conventional pip of 0.01 instead. Fractional display digits do not necessarily redefine the standard pip.

Convert the result into the account currency

If the $30 result converts into euros at 1.0830 dollars per euro, it is approximately €27.70 before conversion fees. A yen quoted pair first produces a yen result, which may then convert into dollars or another account currency. Exchange rate changes can therefore affect the account value of a fixed quote currency gain or loss.

Include the currency funding relationship

Overnight currency adjustments depend on the relevant market convention and provider terms. The interest rate difference alone is not a guaranteed return. Administration costs, settlement days and changing rates matter. When comparing pairs, inspect spread, pip value, volatility and funding together rather than assuming every standard lot has the same risk.

Try it yourself

A USD/JPY CFD represents $20,000. A long position rises by 0.25 yen per dollar. What is the yen price gain and its dollar value at 150 yen per dollar?

Show the worked answer

The gain is 20,000 × ¥0.25 = ¥5,000. At ¥150 per dollar that converts to about $33.33 before fees. The move is 25 conventional yen pips.

Further reading

Educational material, not a recommendation to trade. Numerical examples are hypothetical. CFDs involve leverage and substantial risk of loss. Availability, costs and protections depend on the contract, legal entity, jurisdiction and client classification.

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