CFD Trading costs and fees

Do you want to know what fees and costs can arise in CFD trading? – Then you are exactly right on this page. In the following sections I will inform you transparently about all possible trading fees and define the terms. In addition, I will present you a choice of CFD brokers with which you can directly save fees.

Summary of the costs and fees in CFD trading:

spread: When trading CFDs, the broker usually adds a spread (difference between buy and sell price).
commission. The broker can charge a fee/commission per trade.
Financing fee: CFDs are leveraged products. The leverage must be financed.

The trading fees at a glance

In the following points I will now explain the possible trading fees. In general one can say that through online CFD trading the fees for financial products have fallen extremely. Increased competitive pressure among brokers reduces the costs and fees for traders, because CFD brokers are dependent on a permanent customer base.

Trading fees today are only a few percent of what they were 10 years ago. Shares, CFDs, options or other derivatives can now be easily ordered via online platforms. CFDs are a popular financial product for private traders. The advantage is that you can invest in any market with little capital and high leverage.

1) spread as fee for CFD trading

There is generally a spread with every trade. This is a difference between the buy and sell price. This means that the CFD broker will give you a worse price for your position than the actual market price. This difference is called spread and the CFD broker earns his commission or his money.

The spread is variable with most providers and can depend on the market situation. It is not uncommon for the spread to be automatically higher during periods of high volatility. This is usually due to a lack of liquidity in the market and the broker tries to execute your order. Sometimes it is also necessary for the broker to increase the spread to protect himself.

Facts about the spread:

  • Difference between buy and sell price
  • The spread is variable and depends on the broker and market situation
  • In strong and fast movements the spread is increased
  • The CFD broker earns his money through the additional spread

Less fees through Fixed Spread Accounts?

There are CFD brokers who offer fixed spread accounts. This means that the spread does not change and always has a fixed value. Sounds pretty good at first, but then the spread is much higher than with variable spread accounts. On average, the broker has to charge a higher spread to compensate for the missing fees in volatile phases. CFD brokers with fixed spread accounts include RoboForex and AvaTrade.

2) commissions for each trade

Most CFD brokers take the approach of offering their clients a spread account or a commission account. Instead of an additional spread, the commission account pays a fixed commission per trade. This is for example $6 high per 100,000 volume traded. In some markets, the commission is dependent on a certain percentage of the traded volumes.

In my experience, commission accounts are much cheaper and more sustainable than spread accounts. The customer is then assigned the direct market spread, which is very low in quiet market phases and sometimes does not occur at all.

Facts about the commission:

  • Brokers usually offer spread accounts or commission accounts…
  • Fixed commission per traded volume
  • For stock CFDs there is a maximum commission depending on the volume

3) overnight financing fees for the CFD position

CFDs are leveraged derivatives. The trader basically borrows money from the broker to open his position. The advantage here is that the trader only has to deposit a small security line (margin). This borrowed money is similar to a loan and must be financed. After closing the position, the money naturally goes back to the broker.

A financing fee is charged for positions held overnight. In the technical language this is also called swap. The CFD broker borrows money from other banks and lends this money to his traders. The interest rate is set personally by the provider and is also transparently visible.

In general, this is called a formula:

  • Position size x interest rate / 365 days = swap or financing fee per day

The swap is requested by the broker between 11 pm and 0 am and is automatically deducted. However, the swap can also be positive. However, this only applies to currency pairs. Depending on the investment, investments are made in currencies where there is a positive interest rate difference. This difference is then posted daily to your account (also called carry trade – see video).

Facts about the financing fees:

  • Leveraged CFD positions must be financed
  • The interest rate depends on the broker
  • The swap is deducted for positions that are held overnight
  • The swap can also be positive in Forex trading

SAVE FEES & COSTS WITH A GOOD CFD BROKER

Not always a CFD broker with the most eye-catching advertising has the best trading fees. The costs for traders significantly reduce the own profit in CFD trading. Therefore, when choosing a provider you should definitely pay attention to the trading conditions.

In addition to the trading conditions, there are also other points that a good broker must offer:

  • Favourable trading fees
  • Fast and trouble-free execution of trades
  • Good service and support
  • Fast deposit and withdrawal of customer funds

In the table below you will find several CFD brokers with a good overall package and favourable trading fees. Switching can be worthwhile, because high fees reduce your trading profit:

Other CFD fees and costs

In addition to the trading fees, there may be additional costs for the trader. In general these are very low from my experience and most providers do without them. It is important that the broker discloses all his costs transparently and does not conceal anything. With my recommendations you can expect a transparent cost model.

Account management fees (inactivity)

This is an annoying fee if, for example, you have an account and cannot trade for a long time. From my experience, however, you don’t need to worry too much, because most brokers don’t have this fee. If this fee exists, it will be active in most cases only after 3 – 12 months of inactivity and is up to 50€ high.

Deposit and withdrawal fees

There are usually no fees for a deposit. Many different payment providers are offered, which also want to earn. The CFD broker will take over this fee for you. For withdrawals, however, it can often come to fees. You can see this transparently in your account dashboard.

Usually the payout is free of charge with many providers. However, the effort for very small payouts (eg up to 200 €) is too high and the broker requires a small fee. In summary, these fees are not very high and have already been abolished by many CFD brokers.

Conclusion: The costs for CFD trading are manageable

In general, the fees for trading CFDs are very low and they will continue to shrink in the future. New technologies and improvements allow brokers to reduce their fees for traders.

In total, there are 3 different cost centers for the trader in trading:

  • Spread
  • Commission
  • Financing fees

After reading this page you should now know how a CFD broker makes money and how the fee structure works. Now it is up to you to find a low cost provider, because high fees mean a reduced profit.

My experience and tests have shown that GBE Brokers currently offer the best overall package for a CFD trader. With a wide choice of markets, a strong trading platform, different account models and a good service, the provider can score points.

Good luck with your trading!


Read my other articles about CFD Trading:

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