Contracts for difference

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5. Commission costs

Apart from margin requirements, you also have to pay broker's commission when you trade CFDs.

Broker commissions on CFDs are much lower than on share trades, and the typical charge is 0.25% of the contract value, compared with 1.5% on shares. You pay commission on both the buy and sell side of your CFD trade.

»  Example of commission costs

CFD commission calculator Buy Sell No. of CFDs           Share price    p    p Contract value  £    £    Commission charge    %    % Commission payable £    £    Total commission payable:  £

There are two other points to note about commissions:

1. Some brokers have minimum commissions or minimum deal sizes.
2. Some brokers charge no commission at all, but make their money through a wider bid-offer spread on the CFDs.

1. What are CFDs? 2. The benefits of CFDs 3. Initial margin 4. Variation margin 5. Commission costs 6. Interest payments 7. Dividends 8. Example of a long and short trade 9. Comparison of CFDs to share investing 10. Comparison of CFD trading to spread betting 11. Types of order 12. Stop losses 13. Strategies: Pairs trading 14. Strategies: Hedging an equity portfolio 15. Opening an account with a broker 16. Conclusion

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