CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.
Funding charges, or interest charges, are the fees levied on leveraged positions that are held open overnight.
This is because leveraged trades are made using margin, meaning that you only provide a deposit in order to open the trade. You are in effect borrowing the rest of the position’s total cost from your provider. Funding charges are the cost of borrowing this money over more than one day.
Funding charges are calculated differently dependent on your provider, what leveraged product you are using and what market you are trading. For example, at IG funding charges for CFD trades are based on the relevant interest rate benchmark for stocks and tom-next rates for forex.
Forward contracts will not incur any funding charges, as the cost to keep them open is taken care of via the spread or commission charge. There is also no cost to keep a stock trade open, because stock trades are not made using leverage.
