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I'm trying to learn about stock markets. I eventually want to invest a small amount over a long period. Yet, I notice on a lot of broker sites that they tend to charge an overnight fee for any stocks held over night. I presume this is every night thereafter?

I just wondered because it seems like a wall when you want to let your stock price grow, and an overnight charge eats into this. or, is this only the case for "CFD" stocks? I'm confused.

Any help?

Cheers

  • If you are trying to invest in US stocks, I do not think there is an overnight fee unless you are using margin... On a personal note I use td Ameritrade without using margin & they only charge a 9.99 fee when purchasing and another 9.99 to close. Use can use Scotttrade which is a bit cheaper if you are trying to buy and hold for a long period – Rime Dec 18 '14 at 2:47
  • It is CFD and not CDF. If you trade on margin on CFD you will have to pay interest, which depends on the brokers. And put a country tag, as not all countries allow you to trade in CFDs. – DumbCoder Dec 18 '14 at 9:04
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If you are trading CFDs, which are usually traded on margin, you will usually be charged an overnight financing fee for long positions held overnight and you will receive an overnight financing credit for short positions held overnight.

Most CFD brokers will have their overnight financing rates set at + or - 2.5% or 3% from the country's official interest rates. So if your country's official interest rate is 5% and your broker uses + or - 2.5%, you will get a 2.5% credit for any short positions held overnight and pay 7.5% fee for any long positions held overnight.

In Australia the official interest rate is 2.5%, so I get 0% for short positions and pay 5% for long positions held overnight.

If you are looking to hold positions open long term (especially long positions) you might think twice before using CFDs to trade as you may end up paying quite a bit in interest over a long period of time. These financing fees are charged because you are borrowing the funds to open your positions, If you buy shares directly you would not be charged such overnight financing fees.

  • A minor detail, but I think important for understanding the inner workings at the broker: The financing charge is not for the position that you're holding overnight but rather for the margin that the broker is lending to you that enables you to be in that position (despite not having the money) in the first place. An example where this matters is European stocks: say you buy 10000 shares of ABC on London Exchange and sell them on CHI-X. You don't think you have a position, but in reality the trades are not settled until 3 days later, and you pay financing fees at the broker until then. – dg99 Dec 18 '14 at 18:10
  • @dg99 - that is why I mentioned that the financing fee was on the borrowings. Also CFDs don't work like that, once you close a possition you stop paying the financing fee. – Victor Dec 18 '14 at 21:21

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