Table of contents:
- 1 Spreads and fees at Trading212
Spreads and fees at Trading212
Naturally, the vast majority of traders who first make a comparison between brokers are interested in the costs incurred. The cost factor definitely plays a significant role in addition to the services that the broker can offer. However, you should also not overestimate the fees incurred when trading currencies or CFDs, because especially considering the leverage and the associated chances of relatively high profits, these costs may not be as significant for some trading strategies. In this guide we would like to clarify for you which costs and spreads are incurred by Trading212.
What costs are typical for trading CFDs and currency pairs?
If you take the spread quoted by many brokers as an example, a volume of 100,000 dollars, for example, would usually result in an indirect fee in the form of the spread of only 20 euros, for example. However, if you make a profit of several hundred euros with the transaction – in relation to your own invested capital – such costs are hardly significant for you. Nevertheless, it is of course useful and important to compare the Forex brokers with regard to their estimated costs and the types of fees.
Therefore, in the following guide we would also like to discuss Broker Trading212, in which, for example, trading with currencies is neither connected with fees nor commissions, but instead the broker calculates the typical spreads.
There are certainly some cost types that are very typical if you have decided to trade CFDs or foreign exchange. First of all, there is the spread, which is the difference between the buying and selling price estimated by the broker. For the main currency pairs, such as the US dollar and euro, spreads of between one and three pips are common. Based on a transaction volume of, for example, 100,000 euros, this would mean that the spread would result in an indirect fee of 10 to 30 euros. With more exotic currency pairs, the spreads are naturally sometimes significantly higher, but even then they remain within the limits in terms of the fee burden. This also applies to Trading212.
Some CFD brokers charged commissions in addition to spreads or chose to make commissions the only cost factor in trading. Commissions are usually an indirect fee, the amount of which is calculated as a percentage of the trading volume. However, here too, the costs are usually in the low double digits, so that for most traders they do not really represent a significant burden.
The third cost factor that you will usually find when trading Forex and CFDs is the cost of financing. These are interest costs that the broker will charge you, especially if you hold a long position overnight. If, on the other hand, it is a so-called short position because you have previously short sold a certain currency, you will of course be credited with interest accordingly.
Other cost factors that are also worth noting in connection with trading foreign exchange and CFDs include, in our view, fees that are incurred for certain payment methods that you use with the respective broker. Some brokers also charge a so-called inactivity fee, which is a special form of custody account fee. In this case, for example, you will have to pay monthly fees for your trading account if you have not traded for a long period of time.
The spread as the main cost factor with Broker Trading212
Broker Trading212 has chosen not to charge any fees or commissions when trading foreign exchange and CFDs, but instead it is solely the spread that is the cost factor for the trader here. There are a total of two types of spreads with this broker, namely the so-called floating (variable spreads) and the broker also works with fixed spreads. As is the case with almost all Forex brokers, the size of the spread also depends on the currency pair being traded with Broker Trading212. For this reason, we would like to give you some examples below of what spreads were estimated for some currency pairs on 22 September 2016:
Spreads with Trading212
|EUR/USD||Floating||ab 0.9 Pips||1%|
|GBP/USD||Floating||ab 1.5 Pips||1%|
|EUR/JPY||Floating||ab 2.5 Pips||1%|
Further spreads at Trading212 are current:
- Euro / Swiss Franc: 2.5 Pips
- Euro / US dollar: 0.9 pips
- Euro / Swedish Krona: 29 pips
- British pound / Canadian dollar: 8.9 pips
- Swiss francs / Norwegian crowns: 48 pips
A complete list of spreads for all trading instruments at Trading212 can be found here, and this example shows the huge differences that can exist between currency pairs in terms of the size of the spreads quoted by the broker. Since some of the instruments are floated, it is important that you also look at the trading hours when spreads are usually a little higher or lower.
Financing costs with Broker Trading212
Of course, in addition to the spreads, Broker Trading212 also calculates financing costs if you do not close a position by the next trading day. With open positions, the system works on a daily basis with a classic interest rate swap. The basis for the calculation is the EONIA, i.e. the overnight interest rate, which comes into play when banks lend money to each other.
Here is an extract from the financing costs for currencies at Trading212:
Costs when trading CFDs
There are also low costs involved in trading CFDs, depending mainly on what type of CFD it is. For example, if you wish to trade index CFDs, the broker does not charge any commissions in this case. The situation is slightly different if you choose to trade stock CFDs. In this case, the commissions depend mainly on the currency in which the shares are quoted and range from two (euros) to 150 (roubles).
Costs of deposits and withdrawals
Withdrawals made from the trading account are only subject to charges when using the Bank Transfer payment method. However, these costs are not charged by the broker, but by his bank, so a payout by bank transfer costs five euros. For deposits, the amount of the fee depends on the selected payment method and the currency in which the deposit is made. In this case, however, you have to reckon with not inconsiderable fees of between 0.7 and 3.5 percent. You can find more information about deposits and withdrawals at Trading212 in another of our guides.
The costs at Broker Trading212: a summary
Overall, Broker Trading212 is certainly not one of the cheapest providers in terms of the estimated fees and costs, but there is no significant negative outlier, which would affect particularly high costs for the trader. In terms of spreads, customers can already trade at low costs, especially with the standard currencies, especially since the broker also works with variable spreads in some cases. When trading CFDs, there are also no conspicuously high costs and the financing costs are also within a completely normal range. The situation is somewhat different for the payment methods, because depending on the chosen payment method and account currency, fees of up to 3.5 percent of the transferred equivalent can be incurred, which we consider to be a relatively high and, in our opinion, in part unnecessary cost factor for the trader. After all, there are quite a few brokers who provide at least one payment method completely free of charge.