What costs are involved in CFD trading?

Surprises can be very hit-and-miss. Some people love a surprise, some people loathe a surprise. Of course, it depends on the type of surprise you get – a winning lottery ticket is far more welcome than coming home to find your dog has torn your sofa to pieces. Perhaps something everyone can agree on, however, is that nobody likes a surprise that leaves you out of pocket.

 

If you’re new to CFD trading, you might not be aware of some of the associated costs that come with carrying out a trade. These fees can vary from broker to broker (so you should always check and choose carefully!), but it’s worth getting to know the transactional costs out there. That way, you can avoid any unwanted surprises and also plan your budget accordingly.

 

So, what do you need to look out for?

“It takes money to make money.”

There are two types of fees you might be subject to when you carry out a trade: trading fees and non-trading fees.

 

Trading fees are charged when you carry out a trade. Let’s take a look at some of the most common trading fees you might encounter. 

 

Many brokers will charge commissions for the use of their services, usually amounting to 0.1-2% of the trade’s underlying value. However, some brokers will offer zero-commission trading on certain securities; for instance, with Eurotrader, all stock CFDs are completely commission-free!

 

Traders will also typically have to pay spreads. This refers to the difference between the buy (bid) and sell (ask) price, and it reflects the supply and demand of a specific asset. Typically, higher volatility will lead to wider spreads (which are more costly), and lower volatility will result in narrower spreads. 

 

Some brokers might charge conversion fees if you trade, deposit or withdraw money using a currency that needs converting. For example, if your account is EU-based, but you deposit money from your US bank account, the broker will have to convert your dollars to euros to complete the deposit, and they may charge you for this process. 

 

Note: we at Eurotrader don’t charge conversion fees. Rather, we do conversions at spot market price – but be careful, as you may be charged conversion fees by your bank!

 

If you hold positions overnight, you may be charged an overnight fee. This is a daily cost that is calculated based on the size of the trade itself. More common in leveraged trading, these overnight fees are often referred to as ‘swaps’. However, some religious beliefs inhibit the payment or receipt of interest of any kind, which is why some brokers will offer swap-free accounts.

 

Now, let’s look at non-trading fees. These are the charges incurred which are not directly related to trading itself.

 

For instance, depending on your broker, you might need to pay a monthly account fee. Similarly, if you’re subscribed to any additional services (such as data feeds, VPS services, etc), you’ll often have to pay for a subscription.

 

Furthermore, some brokers will charge for withdrawals and deposits. These costs may vary depending on the method(s) used.

 

Finally, you should also check for whether your broker charges inactivity fees – the last thing you want is to take a break from trading, only to return to a charge you’ve not considered! Any brokers that do charge inactivity fees will specify the time period this will come into effect, so you can plan accordingly.

 

Eurotrader fees

 

Eurotrader has thousands of US, UK and European stock CFDs for you to trade, COMMISSION-FREE! Check out our product listings here.

 

We also don’t charge conversion fees (we do conversions at spot market price), account fees or inactivity fees!

Disclaimer: Eurotrader doesn’t represent that the material provided here is accurate, current or complete, and therefore shouldn’t be relied upon as such. The information provided here, whether from a third party or not, isn’t to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product or instrument; or to participate in any particular trading strategy. We advise any readers of this content to seek their own advice.

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