CFD fees at XTB explained

We have good news! CFD fees are low at XTB compared to all the other brokers we have reviewed.

• CFD fees are made up of the spread, commissions and financing rates charged by the broker.
• Some brokers don't charge commission for trading, but quote a larger spread.
• Financing rates can add up: the longer you hold your position open, the more you are likely to pay.
• With share-based CFDs, you might even receive dividends.

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81% of retail CFD accounts lose money

CFDs (contracts for difference) are basically a type of financial contract that lets you speculate on whether the price of products like commodities, indexes or currencies will go up or down. If you need a quick overview, we've got all the important info in our main article on CFDs. If you plan to invest for the long term, or hold a trading position for a longer period of time, CFDs might not be ideal for you, and you might be better off trading the actual underlying asset as opposed to a CFD.

How are CFD fees calculated?

• Spreads: This is the difference between the bid price and the ask price of the CFD. The spread is essentially the cost of trading, and it is paid to the broker. The spread the brokers set can vary depending on the volatility of the underlying asset and market conditions.
• Commission: Some brokers may charge a commission on CFD trades. This is typically a percentage of the value of the trade. Some brokers might offer a wider spread and not charge any commission.
• Financing rate, swap fee or overnight rate: When you trade CFDs on leverage, you're basically borrowing money from your broker to open your position. As interest rates have gone up in recent years, this part of the fees associated with CFDs has gotten higher too. Unlike the spread and commission, this cost adds up over time: the longer you hold onto your position, the more this cost is going to go up.

Don't forget there also may be non-trading fees that are not directly linked to the trade you make. These can vary based on the type of account you have, and which broker you have signed up with. Charges may include withdrawal/deposit fees, conversion fees and inactivity fees.

Non-trading fees at XTB are considered Average by our experts. Here is a summary of the different non-trading fees at XTB:

Data updated on November 22, 2023

And a quick note about dividends. It might not make a huge difference in the grand scheme of things, but it's good to know. Even though you don't actually own the underlying assets when you're trading CFDs, if you're trading CFDs on a stock or a stock index, you might get a dividend adjustment. The dividend adjustment may be either positive or negative, depending on whether the underlying asset's dividend payment is seen as positive or negative for the position held by the trader.

Warning: 81% of retail CFD accounts lose money.

And now, let’s look at the specific costs of CFD trading at XTB!

Here is a breakdown of some benchmark fees at XTB for different CFD products, compared to the broker's closest competitors. The benchmark fees include all fees (spread, commission, financing rate), calculated for a $2,000 position, with 20:1 leverage: open, hold for 1 week, and close.

Data updated on November 22, 2023

You might want to consider which CFD product to trade, considering the different costs associated with the different products tracking the US market and the EU market. We used costs charged when trading CFDs related to the S&P 500 index and the Euro Stoxx 50 index to check which product is most cost-effective at this broker.

Remember, the Euro Stoxx 50 index is a blue-chip index designed to represent the 50 largest companies in the eurozone, while the S&P 500 index tracks the stock performance of 500 of the largest companies listed on stock exchanges in the US.

Well, the cost of trading an S&P 500 CFD is average at this broker, so you might wish to spare some trading cost and see how other assets are traded at this broker and at what cost. Read more about different S&P 500 CFD fees in detail!

Let's now look at the European markets!

Luckily, the cost of trading a Euro Stoxx 50 CFD is low, so you might want to consider checking out this broker in case you decide to trade Euro Stoxx 50 CFD. Read more about different Euro Stoxx 50 CFD fees in detail!

So far, we told you about the different costs you might come across when trading CFDs. But how do they work in an actual trade?

Let's say you want to trade on the price movement of gold, which we will say is trading at $1,800 per ounce. You decide to buy a CFD on gold with a position size of 5 ounces. Your CFD broker offers a leverage of 1:20, which means you only need to put up 5% of the total trade value as margin, and the broker will lend you the remaining 95%.

Here's how the trade would work:

1. Position size: 5 ounces x $1,800 per ounce = $9,000
2. Margin requirement: 5% x $9,000 = $450
3. Leverage: 1:20
4. Your out-of-pocket cost: $450 (margin)
5. Your broker lends you: $8,550 (95% of the trade value)

If the price of gold goes up by $10 per ounce, you will earn a profit of $50 (5 ounces x $10 per ounce). If the price of gold goes down by $10 per ounce, you will incur a loss of $50.

Now, let's look at the costs involved in this CFD trade:

1. Spread: Let's say the spread on gold CFDs is 0.1% of the trade value. In this case, the spread would be 0.1% x $9,000 = $9.
2. Overnight financing: If you hold the CFD position overnight, you may incur an overnight financing charge. Let's say the overnight financing charge on gold CFDs is 0.05% per day. If you hold the position for one week, the financing charge would be 0.05% x 7 days x $8,550 = $30.

So, in summary, the costs involved in this CFD trade are:

1. Spread: $9
2. Overnight financing (if held for one week): $30

In terms of your overall profits and costs, if the price went up by $10 per ounce, your overall net profit would be $50 (stock price gains), minus your costs: $9 (spread cost), and $30 (overnight financing cost)=$11.

Meanwhile, if gold fell $10 per ounce, your overall net loss would be $50 (stock price loss)+$9 (spread cost)+$30 (overnight financing cost)=$89.

Don't forget that CFD trading involves significant risks, including the risk of losing your entire investment. It's essential to understand the risks and costs before making any trade decisions.

If you are looking for the brokers that offer the best CFD trading conditions, check our top recommendations of the best CFD brokers in the world.

Our expert team here at BrokerChooser specializes in helping you find a broker that best suits your needs. We have reviewed over a 100 brokers based on BrokerChooser's unique methodology.

If you have any feedback or questions, feel free to contact us via email!