What it costs you to trade CFDs
If you're looking for a cost effective way of trading stocks, contracts for difference (CFDs) are worth a look at.
You trade the spot price. This means you enter and exit a trade at the price of the underlying share.
But, as with all forms of trading, there are costs to consider.
So what can you expect to pay? And does the amount you trade make a difference?
Read on to find out…
The two main costs of trading CFDs
There are a few different costs you pay when you trade CFDs
, but there are two main charges…
The first cost is commission. This depends on who you trade though. It ranges from 0.1% to around 0.5%.
You’ll tend to find that this commission is free of VAT.
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You pay commission when you enter and exit a trade.
#2: Daily funding charge
Each night you hold a CFD trade open, there are daily funding charges to consider. If you’re in a long trade, you pay these. If you’re in a short trade, you receive these.
Again, this depends on who you trade through. But it’s usually the overnight SAFEX funding rate plus around 2% to 2.5% for long trades or minus 2.5% for short trades.
Other costs to consider when you trade CFDs
There are other costs, which vary depending on who you trade through.
You may have to pay a monthly fee to use your stock broker’s or trading company’s trading platform. This tends to be around R70 to R75 a month.
Or you may find you don’t have to pay this charge, but if you don’t trade during a month you incur a fee. This tends to be around R150
Have a think about how you’re likely to trade.
If you plan to trade regularly, opt for a trading company that doesn’t charge a trading platform fee but charges an inactivity fee. If you plan to trade infrequently, then a standard monthly trading platform charge may work out more cost effective.
So there you have it. What it costs you to trade CFDs.
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