Trading Account Cost: Understanding the Costs of Trading

There are a number of things to know about the cost of a trading account; what the impacts on your trading profits can be and the different fees and commissions that will affect your bottom line. 

Before you begin trading, it is important to know the trading costs, including ASX trading fees. This means you need to be aware of the inherent costs that come with trading, such as cost per trade. 

Costs refer to not just each transaction fee, but also ongoing costs such as swaps or rollovers that need to be factored in. While these are all parts of the trading process, it is possible to minimise these costs and their effect on your overall trading account. Traders can avoid rollover charges altogether by limiting their activities to day trading, closing all of their positions before the end of each trading day and taking advantage of swap-free trading accounts.  

To ensure that you’re in the best position to trade, you must have full clarity on the fees you will incur, as fees eat into your potential trading returns. That also means finding a broker who is transparent about their fees. 

Let’s look at a handful of common fees that you could incur when trading. 

Brokerage Fees 

Different brokers have varying costs, fees and charges including their initial brokerage fees, joining fees, inactivity fees and foreign exchange fees. Some online brokers may offer low fees overall, but these may differ according to the different investment strategies, investment products, and whether you’re an active or passive trader. 

With Vantage, the fees and charges are clearly defined and include: 

• Spread costs;  
• Interest on client money; 
• Default interest; 
• Swap charges;  
• Rollover charges;  
• Transaction fee; and  
• Commissions in respect of certain accounts.  

It pays to have a broker who is transparent about their fees to avoid any confusion and limit any unforeseen financial issues that could affect your possible profit margins. 

Spread Costs 

You should factor in all fees and costs into your trading profits and this includes spread costs. 

The simplest explanation of the spread is the difference between the bid price (price at which the broker is willing to buy from you) and the ask price (the price the broker is willing to sell to you) for a financial asset such as the CFD or Margin forex contract you trade. This is sometimes referred to as the bid-ask spread and it is a crucial piece of information when you are analysing trading costs. Because a spread is a variable number, it has a direct effect on the value of a trade. 

With Vantage as your broker, the spread is paid by you, but is incorporated into the quoted rates. There is no additional fee or charge. 

This may not be the case, however, with other online brokers. 

Overnight Fees (Swap Fees) 

Some of the other charges to be aware of are overnight / or swap fees. 

When a Margin FX position or Spot CFD is held overnight, you may earn or pay interest on your unrealised profit or loss. A swap charge may be imposed for both long and short-open contracts when the two interest rates are almost equal. Closing a position refers to cancelling out an existing position in the market by taking the opposite position. When you close out your position (cancel out your existing position in the market by taking the opposite position, the net amount of the swap charges and swap credits will be credited to or debited from your Account. If you open and close out your account on the same day, no charge or credit is payable.   

With a Vantage account, we will receive a transaction fee for providing the swap charges or swap credits to you. This fee is calculated on a percentage of the value of the swap charge or swap credit. Explore more information regarding the swap rates of each product on our trading platforms. 

Rollover Benefits and Charges  

A rollover occurs when a trading position is maintained beyond its expiration date, a practice commonly associated with futures contracts trading. This necessitates a transition to a different underlying contract that determines the price when one futures contract concludes. 

To mitigate discrepancies in profit and loss, a cash adjustment is made to represent the difference between the previous order price and the new order price, subtracting an administrative fee of 0.25%. 

Transaction Fees 

Transaction fees are fees that are charged each time a specific transaction occurs. This may be a percentage based on a related dollar amount or related to a fixed dollar amount. A transaction fee may be charged when you trade Share CFDs. 

With a Vantage trading account, these fees are typically charged as follows: 

• Vantage offers a $0 commission fee when you trade US shares. 

• Trading Hong Kong shares CFDs attracts a fee of 50 HKD or 0.25% of the transaction value (whichever is greater), 

• Trading Australian shares CFDs attracts a fee of 6 AUD or 0.08% of the transaction value (whichever is greater), 

• Trading United Kingdom shares CFDs attracts a fee of 0.1% of the transaction value.

• Trading European share CFDs attracts a fee of 0.1% of the transaction value.

Fees are charged at the rate per transaction and then converted to the currency of your account. 

Inactivity Fees 

Some brokers may charge an inactivity fee when an account lies dormant for a specified period. With Vantage, you will not be charged any account inactivity fees when you stop trading. 

Commission 

There are some key things to note about commissions on trading accounts. Some may offer a fixed commission such as with Vantage charging only $1.00 commission per standard FX lot, one way. 

• Commissions and fees aren’t universal—they vary from product to product and broker to broker and it pays to do your research 
• If you want to keep your expenses to a minimum, then it is advisable to invest with a low brokerage firm 
• Before you use a brokerage service, you should know their fee schedule 

The most noticeable costs of CFD trading include the commission (which is deducted from the account on the entry and exit of a trade) and the spread, i.e. the difference between the bid and offer prices at the time you place the order. 

When you trade with Vantage, commissions may be charged to your trading account which will be reflected when you open a Margin FX or CFD contract. If you hold a RAW account, the commission charged will vary based on the currency of your account and will increase/decrease in proportion to the size of the contract traded.  

The Vantage Commissions (and all other fees or charges) are outlined for you in the Vantage Global Prime Financial Guide (FSG).  

Tips to Minimise Trading Account Costs 

The trading cost of executing CFD trades has been significantly reduced due to the growth of online brokers.  

Here are other tips to consider to minimise your trading costs; 

1. Choose the Right Broker: Costs can vary significantly between brokers. Look for a broker with low transaction fees, tight spreads, and no hidden charges.  

2. Trade During Peak Liquidity Times: Execute trades when liquidity is high (such as during the overlap of trading sessions for forex markets), which can lead to tighter spreads and lower transaction costs. 

3. Use Limit Orders: Utilise limit orders to control the maximum price you’re willing to pay or the minimum price you’re willing to accept. This can help reduce slippage, which is the difference between the expected price of a trade and the price at which the trade is actually executed. 

4. Monitor and Reduce Leverage: While leverage can increase the potential returns, it can also magnify the costs, especially overnight financing charges on leveraged positions. Manage leverage carefully to keep these costs in check. 

Vantage offers CFDs on stocks, forex, cryptocurrencies and commodities trading to those in Australia. Our RAW account option has some of the lowest spreads on the market, starting from 0.0, and at $2 per lot commission, round trip. 

Trading with Vantage

Vantage is a global, multi-award winning and multi-asset broker headquartered in Sydney. When you trade with us, you can be sure we always deport our effort to offer the best in service and comply with the regulatory requirements. 

We offer low commissions and even No Deposit Fees. Some of Vantage’s products are even offered commission-free from time to time. Check our website regularly for updates and open a CFD trading account with Vantage today. 

Contracts-for-Difference or CFDs allow you to speculate on the price movements of a financial product without owning the underlying asset. 

If you want to get your trading started today, it only takes a matter of minutes to try our special Demo Trading Account or to Open a Live Account.