Hi,
I have an account value of around £90,000. My portfolio mostly consists of CFD stocks. I have been using this app for a few weeks now and things have been going well. However I am loosing over £110 per day in interest charges. I also think they charge interest on weekends as well as trading days. This works out to be over £40,000 a year in interest. So I have to make a minimum of £40,000 p/a just to break even. Any thoughts?
I don’t use CFD but if you have an open position over night you will be charged interest. That’s not unique to T212, I haven’t heard of any broker that would let you for free. I assume if you left it open on Friday you would pay for sat/sun.
I would recommend closing the position unless you will definitely beat the interest in holding over night.
Would it not be better to use the trading account with that kind of value are you talking a 90k leveraged or you have 90k in account.
There is no definitely with trading stocks haha. So far I am turning a profit despite the interest charges but after seeing I am being charged over £110 per night, I am concerned.
Maybe, I don’t know. The leverage is hugely beneficial for stocks that are growing. We are talking 90k value, which when I added up the value of my leverage comes to about £390k
please don’t lose your 90k. when those stocks go down your leverage will be very detrimental.
True, however I keep my free funds at a healthy margin. I am more worried about having to make £40k a year just to break even.
welcome to the wonderful world of CFDs where everything is stacked against you with fees and spreads. no wonder 80% of people lose money
I don’t trade CFDs, but I’m curious about interest charges.
If I have 10k cash and CFD position value less than 9k, will there be interest charges, even though in theory there is no margin involved here?
Yes you pay interest every night on any CFDs you own regardless of how much cash you have in your account.
what is it like a 0.155% interest on open trade?
90k/100-900/100-9 140/9-15.55
CFD instruments have “SWAP” fees. Which you have worked out.
In general, use the account types as follows:
CFD:
Works best when used on a short timeframe. NOT long term.
Timeframe: 1day to 1month
Example - You think the market is going to drop next week.
You use CFD to gain extra leverage on the instrument you are trading in hopes of getting a larger return if the market goes the direction you expect. Inversely, if the market goes against you, your losses will be larger.
To get this added benefit, a SWAP fee is charged overnight.
Additionally if the stock pays dividends, and you are SHORT, you must pay the dividend rather than receive the dividend. If you are LONG the position, you receive the dividend just as normal.
If the stocks go down below your Margin requirements, your positions will lockup until you add more money or until the value gets so bad that Trading212 will close these positions automatically. So be extremely careful!
In a nutshell, use CFD if you need short-term added leverage or if you wish to hedge out a position you already hold in your Invest/ISA account.
Invest/ISA:
Best for building a portfolio of stocks you wish to keep over a long timeframe.
You can buy stocks with no obligation to sell and no overnightly fees.
Best used when you wish to keep trades going for months & years.
My advice:
Given your account balance amount, I would strongly suggest you to move funds to the Invest/ISA account as there will be no overnightly fees.
If you feel like you need to hedge a position, or you feel a company will underperform/overperform coming in to earnings reports, you could add leverage by buying a CFD contract a week prior to these earnings reports and hopefully profit if your prediction comes true and the market rallies/crashes. This is just one example use case.
Hope this helped clear the air.
Great advice. Much appreciated.