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How CFD Trading Costs Depend on the Underlying and Broker

Article Quant Q&A · Author: Thorolus
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Summary

The document answers a question about finding a contract for difference broker that charges only when a trade is profitable. It explains that CFD trading costs have several components: the bid–offer spread, margin requirements, overnight funding, and commissions. Which costs apply, and how large they are, depends on the underlying asset and whether the contract is traded over the counter or with direct market access.

Some CFDs may have no explicit commission, while others, such as equity CFDs, can charge commission as a percentage. A few minutes of holding time suggests scalping, and the response notes that some brokers may restrict or dislike that activity. It rejects profit-only charging as an accurate description of how CFDs work. The discussion is a short overview rather than a broker comparison: it gives no fee schedule, execution evidence, or asset-specific recommendation, so actual costs must be assessed for the particular contract and provider.

Key ideas

  • CFD costs can include spreads, margin requirements, overnight funding, and commissions.
  • Applicable fees depend on the underlying asset and the way the CFD is traded.
  • Some CFD categories may omit explicit commissions, while others charge them as a percentage.
  • Short holding periods may amount to scalping, which some brokers may not accommodate.
  • The response does not identify a broker that charges only on profitable trades.

Tags

ExecutionMarket microstructureRisk management
Full text
# CFD Broker that only charges for earnings


# CFD Broker that only charges for earnings












I've created a small piece of software that allows me to invest into CFDs and gain some small profits. However, most brokers I've found require high opening/closing fees that are in most cases a way larger than my earnings (It does rely on small movements and only holds it for a few minutes). Is anyone of you in aware of a broker that has very small opening / closing fees or, even better, that only charges for my profits?

## Answer by rbm (score 1)

https://quant.stackexchange.com/a/37775

that only charges for my profits - do you understand how CFDs work? For the sake of simplicity, there are four aspects to CFD trading:

(1) bid/offer spread - differs on whether you're doing OTC contract, or have DMA access

(2) margin requirements - usually tiered and each tier has % of required margin

(3) overnight funding

(4) commissions - there are CFDs with no commissions (e.g. cash indices, futures); and there are CFDs where commissions are calculated as % (e.g. equity CFDs).

So, to dissect your question:

invest into CFDs - CFD is a contract, you need to be specific - what is the underlying asset?

high opening/closing fees - depends on asset class, see above

only holds it for a few minutes - you're trying to scalp the market. Some brokers may not like that.

only charges for my profits - no, that's not how CFD operate.

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.