# Financial Mathematics: Counting the Money (CFD trading). Lesson 3)

As we found out in previous articles, there are assets with excellent potential. Profit is a good and very desirable category, but it does not appear out of thin air. About, how much money is needed to work on commodity and stock markets via CFDand we will talk about it within the framework of this article.

### CFD Specifications

The main parameters of the contracts are described in Specifications - a kind of contract passports. For example, they indicate the volumes of transactions, which we talked about when we considered the swings on the oil market. It is the volume of transactions and price volatility that allows us to determine the earning potential of this or that market. Another important section of the specification is margin requirements (or simply - margin). Margin indicates the minimum amount of funds in the account, which in principle is necessary to make a deal. For example, in FOREX CLUB, an oil contract has a volume of 100 barrels of oil, and the margin is \$400. This is the technical minimum that would allow you to buy or sell one contract. But is this amount sufficient to work in the market?

As we have already noted, from a technical point of view, yes. We can close the deal. But we definitely cannot control the risks. And here's why... The average price changes on Brent oil are now about \$2.5 (dollars per barrel) per day. We remember that one contract for oil in FOREX CLUB has a volume of 100 barrels. Consequently, on average, the result of the transaction will change by plus/minus \$250 per day.

Of course, it's great if prices go in the direction we calculated. And each day will add us, on average, \$250. If we make a deal with the aim of a good long movement, we can be in the deal from a few days to a few weeks or even months. During this time, prices can move short-term, as traders say, and against us. And a day of such counter-movement can take away \$250. And now a simple question - for how many such days our technical minimum of \$400 is enough? You have to agree, not much at all. Hunting for good moves, we must have a good reserve in our account to withstand counter-movements for even a few days. According to the most general estimates, this reserve should be at least \$1000 per contract.

### Sufficient amount for CFD trading

When working with two contracts, the comfort collateral should exceed the amount of \$2000, with five contracts - \$5000 and above. Yes, the bar for transactions increases, but so does the payoff. Let's show it on a simple example: working with five contracts (500 barrels of oil) and the average change in oil prices of \$2.5, a successful day will bring on average \$1250. As in any other kind of business, more capital gives rise to more profits. Just do not forget about the risks. And they are controlled through the calculation of the comfort margin on the account.

FOREX CLUB supports dozens of contracts through which traders and investors enter the currency, commodity and stock markets. This makes it possible to form a very broad investment portfolio. It can include, for example, contracts on the euro, gold, oil, shares of the well-known "fruit company" Apple Inc. and even contracts on stock indices! On average, each such contract requires a comfortable security on the account from \$1000. To create the simplest portfolio, you need at least \$5000. And for more serious investment portfolios - from several tens of thousands of dollars. What are the principles underlying forming investment portfolioswe will talk about in our next article.