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I'd like to push my trading experience a bit.

I've been looking into opening an account with a broker that offers automated trading (I'm a programmer and would like to use my own trading algorithms). It seems for an under 25 the joining fee is reduced for some brokers, e.g. interactive brokers costs £3,000. So it's a good time for myself to open an account.

Before I apply for an account does anyone know what the fees are like? I've tried trading with CFDs (Contract for difference) but in my experience the spread fee on every trade cripples your likelihood of making a profit (you either profit small or lose big). I'll elaborate my point; I've previously been trading with a platform called Plus500 in the UK. If you cast your eye on the image below, you'll see that the current price of oil is at 100.02 per barrel, but to buy will cost me 100.06 (the red lines). Can this be eliminated so I can open a trade at the actual price and pay a flat fee instead?

enter image description here

I also began trading at the beginning of the bitcoin boom but the CFD platform I was using (Plus500) only let me keep a trade open for no more than 24 hours. This meant you couldn't buy then wait until the opportune moment to sell, you were forced to close at a loss if you hadn't closed your trade earlier in the small window you're allocated. I promise I'm not making this stuff up.

Will opening an account with something like interactive brokers alleviate those problems I've mentioned? If not then I don't see any reason to risk my money.

Thanks for your help and advice.

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    CFDs are not legal in some countries. Can you add your location? It might get you a better answer.
    – JTP - Apologise to Monica ♦
    Commented May 8, 2014 at 22:33
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    @JoeTaxpayer I've updated my question mentioning I'm from the UK.
    – Ally
    Commented May 9, 2014 at 21:30

2 Answers 2

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The fees with trading CFDs are usually lower than standard share trading. There is usually no joining fee to join a broker and start trading with them, you must be talking about the minimum required to fund your account to trade with.

What country are you in? Because if you are in the USA I believe CFD trading is not allowed there.

Also there is no margin fee associated with trading CFDs. The margin is what you put in to buy or sell the CFD when you open a position. For example if you were to open a position in a share CFD where the underlying share had a price of $10 and you were looking to buy 1000 units. To buy the shares outright your outlay would be $10000 plus brokerage. If the CFD provider had a 10% margin on these share, then your initial margin to open a CFD position would be 10% of $10000 or $1000. If the price of the shares went up to $11 and you sold the shares you would get $11000 ($1000 profit), if you sold the CFDs you would get $2000 ($1000 profit). If on the other hand the shares went down to $9 and you sold the shares you would get $9000 ($1000 loss), if you sold the CFDs you would get $0 ($1000 loss).

You have to be careful with margin, it is a two edged sword - it can multiply your gains as well as multiply your losses.

The only fees you should be charged with CFDs is brokerage (which should be less than for share trading), and overnight financing costs. This is charged for everyday you hold a long position overnight. You should not be charge any overnight financing cost for holding short positions overnight, and if interest rates were higher you might actually get paid an overnight financing for holding short positions overnight.

You may have been closed out of your bitcoin position because you didn't have enough funds in your trading account to open the size trade that you opened.

From your question it seems like you are not ready to trade CFDs, you should really learn more about CFDs and the trading platform/s you plan to use before trading with your valuable money. You could probably open up a simulation account whilst you are learning the ropes and become more familiar with the trading platform and with CFDs. And if you are not sure about something ask your broker, they usually have training videos and seminars.

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    Thank you for your answer, I don't think I've explained myself well enough so I've updated my answer to show an actual example using my CFD platform and found a source explaining my second point about a maximum 24 hours trade (I didn't realise it was unusual). I'm mainly wondering if I can open trades costing a flat fee instead of a percentage of the spot price.
    – Ally
    Commented May 9, 2014 at 21:27
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    @Ally - Yeh, I have never heard of a CFD broker closing positions within 24 hours - looks like they are protecting their bottom line. I would definitely look for other brokers - check out their commissions, spreads and other fees before using them. As I said maybe try out their practice accounts before actually trading with them. I usually trade share CFDs so the spreads usually match the underlying share spread but I get charged a small commission of $5 (or 0.7%) per trade. FX and commodities usually don't have commissions so that might be why the spreads are bigger.
    – Victor
    Commented May 9, 2014 at 22:12
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    @johnblair - when you trade CFDs you are basically trading a contract for the value of the underlying - in this case shares. As an example, you might buy 1000 XYZ CFDs for the shares XYZ with a current market price of $30. So the value of the underlying shares would be $30,000 as would be the value of the CFDs. However, as CFDs are usually traded on margin you are not paying $30,000 to open the CFD position, you might pay say $3000. The other $27,000 is lent to you by the broker. So you are controlling $30,000 worth of stock by only outlaying $3000 upfront.
    – Victor
    Commented Feb 4, 2021 at 7:42
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    @johnblair - you get the full benefit of the dividends and any price movement in your favour, but you also make the full loss based on $30,000 if the price moves against you.
    – Victor
    Commented Feb 4, 2021 at 7:54
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    Thanks @Victor - that makes perfect sense - upvoted comments and answer.
    – john blair
    Commented Feb 4, 2021 at 12:23
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Avoiding fees in cfd trading is most likly not possible. Trading CFD long term is not worth it as overnight fees will eat up your profit and you will end up wasting your time. Yes for short term , if you have a solid strategy and rules then maybe it is possible to generate profit. Interactive brokers is a solid optin if you are investing in stock for long term. But if you trading futures then it is much like cfd. Fututre trading does not involved overnight fees but it has expiry date, which will be very frustrating if your positon is closed in loss and you wanted to hold it till the next zone.

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