What Are the Costs of CFD Trading?
CFD trading costs fall into two categories: trading costs that apply when you open and close a position, and holding costs that accrue if you keep a position open overnight. The main costs are the spread, overnight financing charges (swap rates), and in some cases commission. Understanding these costs upfront is essential — they directly affect your profitability and should be factored into every trading decision.
What Are the Costs of CFD Trading?
CFD trading costs fall into two categories: trading costs that apply when you open and close a position, and holding costs that accrue if you keep a position open overnight. The main costs are the spread, overnight financing charges (swap rates), and in some cases commission. Understanding these costs upfront is essential — they directly affect your profitability and should be factored into every trading decision.
1. The Spread
The spread is the difference between the buy price (ask) and the sell price (bid) quoted by your broker. It is the most visible cost of CFD trading and applies to every trade you open.
When you open a CFD position, you immediately start at a small loss equal to the spread — the market needs to move in your favour by at least that amount before your trade becomes profitable.
Example: If the buy price on the UK 100 is 8,502 and the sell price is 8,500, the spread is 2 points. If you're trading 1 contract per point, you need the market to move 2 points in your favour just to break even.
Spreads vary by instrument and market conditions:
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Spreads tend to widen during periods of low liquidity, outside market hours, and around major economic announcements. For a deeper understanding, learn how CFD trading works.
2. Overnight Financing (Swap Rates)
If you hold a CFD position open past the daily market close, you will be charged an overnight financing fee — also called a swap rate or rollover fee. This reflects the cost of borrowing the leveraged portion of your trade.
Overnight fees are calculated as a percentage of the total position value (not just your margin deposit) and are applied daily for as long as the position remains open. They accumulate over time, making them a significant cost factor for traders who hold positions for days, weeks, or months.
How overnight fees work:
- Long positions (buying) typically incur a charge
- Short positions (selling) may incur a charge or receive a small credit, depending on the instrument and prevailing interest rates
- Rates are based on interbank lending rates (such as SOFR or SONIA) plus a broker markup
Example: If you hold a £10,000 CFD position on a share overnight at an annualised rate of 4%, the daily financing cost is approximately £1.10 (£10,000 × 4% ÷ 365).
This is why CFDs are generally considered short to medium-term trading instruments rather than long-term investment vehicles. If you are looking to hold positions long-term, Investment Plans or ETFs may be more cost-effective alternatives. Learn more about what leverage is and how it affects your costs.
3. Commission
Some CFD brokers charge a separate commission on top of the spread, particularly on share CFDs. This is typically a percentage of the total trade value.
At XTB, share CFDs are available with competitive commission structures — check the XTB pricing page for current rates across all instruments.
Commission-free instruments (where the spread is the only trading cost) typically include forex pairs, indices, and commodities. Share CFDs more commonly carry a commission charge due to the direct market access pricing model used for equity instruments.
4. Currency Conversion Costs
CFDs are denominated in the currency of the underlying market. If you are trading a US share CFD from a GBP account, your profit or loss will be calculated in USD and then converted to GBP.
This currency conversion introduces FX risk — the exchange rate at the time of conversion affects your final profit or loss — and may attract a small conversion fee depending on your broker.
This is one structural difference between CFDs and spread betting: spread bets are always denominated in GBP, eliminating currency conversion costs entirely. For a full comparison, read our guide to CFDs vs Spread Betting UK.
5. Margin and Leverage Costs
CFDs are traded on margin, meaning you only need to deposit a fraction of the total trade value to open a position. While margin itself is not a direct cost, it has an important indirect relationship with your costs — because leverage increases the total position size, it also increases the absolute value of overnight financing charges.
FCA regulations cap leverage for UK retail clients at:
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Understanding leverage is essential before opening any CFD position and learn how to start CFD trading as a beginner.
6. Inactivity Fees
Some brokers charge an inactivity fee if no trades are placed within a defined period — typically after 12 months of account dormancy. Always check your broker's terms before opening an account.
How to Minimise CFD Trading Costs
Understanding costs is one thing — managing them is another. Here are the most effective ways to keep CFD costs under control:
- Trade during peak liquidity hours. Spreads are tightest when markets are most active — for forex, this is the London/New York session overlap (1pm–5pm UK time). For indices, trade during the relevant exchange's core hours.
- Avoid holding positions overnight unnecessarily. If your trading strategy doesn't require overnight exposure, closing positions before the daily rollover eliminates financing charges entirely.
- Use limit orders. Entering trades at your desired price rather than at market reduces the impact of spread widening during volatile conditions.
- Factor costs into your risk/reward calculation. Before opening any trade, calculate your total cost (spread + potential overnight fees) and ensure your target profit accounts for these. Learn about effective CFD trading strategies that incorporate cost management.
- Choose the right instrument for your timeframe. Short-term trades on liquid instruments (major forex pairs, major indices) carry the lowest spread costs. Share CFDs and exotic instruments typically carry higher spreads and wider overnight fees.
CFD Costs vs Other Trading Products
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To understand the full range of markets you can access, explore commodity trading, forex trading, and ETF investing.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 72% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
FAQ
The spread is the primary cost for most CFD traders — it applies to every trade and represents the difference between the buy and sell price. For positions held overnight, swap rates (overnight financing fees) become the dominant ongoing cost.
Reputable FCA-regulated brokers are required to disclose all costs clearly. The main costs to look out for are the spread, overnight financing rates, commission on share CFDs, and any currency conversion charges. Always review a broker's full fee schedule before opening an account. Read our guide on how to look for the best CFD broker.
Yes, directly. Every cost reduces your net profit or increases your net loss. A trade that looks profitable before costs may break even or produce a loss once spread, overnight fees, and any commission are accounted for.
Overnight fees are calculated as a percentage of the total notional position value (not just your margin) on an annualised basis, divided by 365 for the daily rate. The rate is typically based on a benchmark interbank rate plus a broker markup.
For short-term trading, CFDs can be more cost-effective than buying shares directly — there is no stamp duty (saving 0.5% on UK shares), and the spread on major instruments is often tight. For longer-term holding, overnight financing costs accumulate and can make CFDs more expensive than direct ownership over time.
A pip (percentage in point) is the smallest standard price movement in a forex pair. For most pairs, one pip is a movement of 0.0001 in the exchange rate. Understanding pips is essential for calculating costs and profits on forex CFDs.
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This content has been created by XTB S.A. This service is provided by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, entered in the register of entrepreneurs of the National Court Register (Krajowy Rejestr Sądowy) conducted by District Court for the Capital City of Warsaw, XII Commercial Division of the National Court Register under KRS number 0000217580, REGON number 015803782 and Tax Identification Number (NIP) 527-24-43-955, with the fully paid up share capital in the amount of PLN 5.869.181,75. XTB S.A. conducts brokerage activities on the basis of the license granted by Polish Securities and Exchange Commission on 8th November 2005 No. DDM-M-4021-57-1/2005 and is supervised by Polish Supervision Authority.
