CFD Trading Costs
CFD trading costs include spreads, commissions and overnight financing, with possible charges for currency conversion, stock borrowing and account services. The price movement shown on a chart is therefore not the return you keep. As ASIC’s Moneysmart guidance on CFDs explains, these expenses can be high, and most people lose money trading these products.
The useful question is not simply “What is the spread?” It is “What will this position cost to open, hold and close?” In CFD trading, compare costs against the full position value, the intended holding period and the profit you expect before charges. A small fee can consume a large share of a small trading gain.
Spreads: The Cost Built Into the Quote
The spread is the difference between the broker’s selling price, or bid, and buying price, or ask. You buy at the ask and sell at the bid. It is normally embedded in those prices rather than deducted as a separate account fee. IG’s explanation of CFD trading charges also notes that spreads vary with market conditions, trading hours and order size.
Suppose an index CFD is quoted at 8,000 to sell and 8,002 to buy. Your position has a total value of $2 per index point. Buying at 8,002 and immediately closing at an unchanged bid of 8,000 would produce a $4 loss:
Spread cost = spread in points × total position value per point
Here, that is 2 × $2 = $4. The calculation uses the monetary value of the entire position per point, including every contract held.
This example also answers a common accounting question. An immediate round trip at unchanged prices costs one full spread, not two. Relative to the midpoint, you cross half the spread when entering and half when leaving, assuming a symmetric quote. If the spread changes, the entry and exit costs change too.
Do not treat an advertised minimum spread as your expected trading cost. Record the quotes available during the hours you intend to trade. For a strategy targeting a five-point movement, a two-point spread deserves much more attention than it would for a strategy targeting fifty points.
Commissions and Minimum Charges
Share CFDs often carry a separate commission, although some providers waive it on selected markets. The charge may be a percentage of transaction value or an amount per share, subject to a minimum. CMC Markets’ UK commission schedule illustrates these different arrangements. Check whether a quoted rate applies per side: opening and closing are separate transactions.
Consider a hypothetical rate of 0.1%, with a $5 minimum per order. On a $1,000 opening transaction, the percentage calculation produces $1, so the $5 minimum applies. If the closing transaction has approximately the same value, commission totals $10. That is 1% of the opening position value before spread or financing costs.
Minimum charges can make small, frequent orders expensive in percentage terms. Splitting a position across several orders may also trigger several minimum charges, depending on the broker’s rules. Check how partial fills and partial closures are treated.
A commission does not necessarily replace the underlying market spread. IG, for example, charges share CFD commission rather than adding its own spread to the market spread. Zero commission and zero transaction cost are not the same thing.
Overnight Financing and Holding Costs
Cash CFDs held through a broker’s daily funding cutoff may incur an overnight adjustment. Depending on the instrument, direction and applicable rate, this can be a debit or credit. CMC Markets’ CFD holding-cost explanation shows calculations using position units, the current midpoint price and the relevant holding rate.
For a contract using a simple annual funding rate, an estimate is:
Funding charge = position value × annual funding rate × chargeable days ÷ annual day-count divisor
At a hypothetical annual rate of 8%, a $10,000 position using a 365-day divisor costs approximately $2.19 for one chargeable day. Three such days cost $6.58, assuming the position value and rate remain unchanged.
The divisor is not universal. IG’s share CFD contract details use either 360 or 365 days depending on the market. Check the cutoff time, weekend treatment and whether the displayed rate already includes the broker’s administration charge.
Nor does “no overnight fee” necessarily mean no financing cost. IG’s international CFD charges page explains that its futures CFD funding is built into the spread. Compare the complete cost over your intended holding period. The separate guide to CFD overnight financing covers funding mechanics in more detail.
Why Margin Does Not Make the Position Cheaper
Margin is collateral supporting the trade, not a transaction fee. It also should not be mistaken for the amount on which every charge is calculated. The FCA’s review of CFD pricing and value highlights that overnight funding can be charged on the full exposure, without an offset for funds held in the account.
Suppose $2,000 of margin supports a $10,000 position. A $30 trading cost equals 0.3% of the position value but 1.5% of the posted margin. Both percentages describe the same bill; the smaller deposit makes its effect on committed capital more pronounced.
When comparing providers, hold position size constant. Comparing two accounts using the same margin deposit but different market exposure does not compare like with like. The guide to CFD margin and position exposure explains that distinction.
Slippage and Guaranteed Stop Premiums
Slippage occurs when an order executes at a different price from the requested price. It can improve or worsen the result. Unlike commission, adverse slippage is an execution cost rather than a scheduled broker fee. IG’s execution explanation describes how insufficient liquidity can affect fills and why ordinary stop orders can execute at worse prices.
In a hypothetical trade worth $5 per point, an exit three points worse than expected reduces the result by $15. A narrow quoted spread does not compensate automatically for that difference.
Guaranteed stops provide price protection under the broker’s contract terms, usually for a premium. Charging arrangements matter: CMC Markets’ guaranteed stop terms, for example, provide for refunding the original premium when the stop is not triggered. Availability and minimum placement distances also apply.
Include any payable premium when calculating the trade’s potential loss. Do not remove protection simply to improve a fee comparison. See CFD stop-loss orders and guaranteed stops for the differences between order types.
Currency Conversion and Other Charges
Currency conversion
A position denominated in a different currency from your account may generate conversion costs. Check what is being converted rather than applying the advertised percentage to the entire position automatically. Under CMC Markets’ UK CFD pricing terms, realized profits and losses are converted into the account currency using a rate that includes a conversion adjustment.
Suppose a hypothetical provider applies a 0.5% conversion fee to a $200 realized profit. The fee’s equivalent value is $1. Applying the same percentage to a $20,000 position would incorrectly produce a $100 estimate if only the profit is being converted. Review the treatment of losses, commissions and funding entries as well.
Stock borrowing and dividend adjustments
Short share CFDs may attract borrowing charges. IG’s share CFD terms explain that these charges vary by share and can change at short notice. They also describe dividend adjustments: qualifying long positions receive credits, while short positions receive debits.
Keep borrowing fees separate from dividend adjustments in your records. The latter are contract cash flows associated with the underlying dividend, not simply another dealing commission. Recording only the price result gives an incomplete account of the trade.
Account and service fees
Check charges outside the order ticket. CMC’s UK cost schedule includes possible market-data subscriptions and account inactivity fees. IG’s international schedule also identifies possible third-party payment-processing charges. Terms vary by provider and account.
Allocate recurring expenses across your actual activity when reviewing performance. A hypothetical $30 monthly subscription adds $3 per completed trade if you make ten trades. Placing extra trades to dilute that figure is not a saving.
A Worked Example of Total CFD Trading Costs
Consider a hypothetical long share CFD position representing 200 shares. The opening midpoint is $50, giving $10,000 of exposure. The spread is $0.04 per share, so you buy at $50.02.
Assume commission is $0.02 per share with a $10 minimum per side. Funding is calculated on $10,000 at each of three daily cutoffs, using an 8% annual rate and a 365-day divisor. After the third cutoff, the midpoint rises to $50.80. The spread remains $0.04, allowing you to sell at $50.78.
These are illustrative assumptions, not a broker quotation. There is no slippage, currency conversion, dividend adjustment or guaranteed stop premium.
| Item | Calculation | Amount |
|---|---|---|
| Gain measured from midpoint prices | 200 × ($50.80 − $50.00) | $160.00 |
| Spread cost across entry and exit | 200 × $0.04 | −$8.00 |
| Opening and closing commissions | $10 minimum × 2 | −$20.00 |
| Funding for three chargeable days | $10,000 × 8% × 3 ÷ 365 | −$6.58 |
| Net trading profit before tax | $160.00 − $34.58 | $125.42 |
The same result can be calculated directly from execution prices. Buying at $50.02 and selling at $50.78 produces $152 before commission and funding. Subtract $20 and $6.58 to reach $125.42.
Do not subtract the spread again when using actual execution prices. It is already reflected in the $152 result. The same accounting principle applies to slippage already captured in the recorded fills.
Under these assumptions, the midpoint needs to rise by approximately $0.173 per share to cover $34.58 of costs across 200 shares. This break-even estimate changes if the holding period, funding basis or execution conditions change.
How to Compare CFD Costs Before Trading
Build comparisons around a repeatable trading scenario, not a provider’s cheapest advertised instrument. Use the same market, direction, position size, trading hours, account currency and holding period.
- Calculate the complete round trip. Include entry and exit commissions, the spread and any minimum charges.
- Price the intended holding period. Include funding and check the cost if the position remains open longer than planned.
- Allow for execution uncertainty. Test how wider spreads or adverse slippage would affect the result.
- Reconcile against statements. Separate embedded execution costs from cash charges so nothing is omitted or counted twice.
The FCA’s review found wide differences in overnight charges, including cases where one provider charged for a short position that another would credit. It also warned about funding costs on matched long and short positions. Holding opposite contracts does not necessarily cancel their expenses.
Include estimated costs in CFD position sizing, rather than treating them as an afterthought. If a trade’s expected gross gain barely exceeds its normal costs, a small execution difference can erase the remaining margin for profit.
Check availability before comparing accounts: OANDA’s U.S. regulatory disclosures state that CFDs are not available to U.S. residents. Broker examples here describe their stated regional terms, not a universal fee schedule. Lower costs improve the arithmetic of a trade; they do not remove its market risk.