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Transaction Costs
Do you really know what costs and restrictions are on your trading account? We think it’s time for you to take another look.
Hidden transaction costs are hurting traders
Every trader is spurred on by the thought of maximising their potential profit, but little do they know that their activities are being impacted by the hidden transaction costs on their accounts.
Whether it’s restrictions on the money you can take out or secret trading charges, sadly there is a long list of unfair practices brokers implement at the expense of the trader. These are often buried deep within the company websites. But why should such important information be so hard to find?
Our approach to transaction costs
We don’t claim to be perfect, but we are committed to giving every one of our customers the fullest and fairest trading experience possible. This means being open and honest about everything being part of our community involves, especially our charges.
The spread reflects your trading costs.
- This is the difference between the buy and the sell price and the narrower the spread, the smaller the costs to trade. Here at Trade Nation, our spreads are always low and fixed, unlike other brokers who widen them when markets become volatile.
Our only other charge is the overnight interest on your trades.
- You trade on margin with us, which means you can open a position with just a small percentage of its total value.
- We effectively lend you the full amount so you can make the trade, and in return, you pay a little each night your position remains open. The amount depends on the market you’re trading and the direction of the trade.
How we calculate overnight interest
We calculate overnight interest based on the 1-month interbank rate for the currency you trade in.
LONG POSITIONS
If you trade in British pounds, we use the 1-month LIBOR (London Interbank Offer Rate) and add 2.5%.
Say 1-month LIBOR is 1.25%, we calculate the interest rate by adding 2.5% to 1.25% totalling 3.75%.
FOR EXAMPLE
You have bought £2 per point of the UK100
rolling cash index at 6250.
The total value of this trade is:
6250 x £2 = £12,500
You only need a small percentage of this in your account to open your position.
When you hold this position after 10pm London time, we charge overnight interest.
So, if UK100 is valued at 6265 at this point,
the calculation is as follows:
6265 x £2 x 3.75/100 x 1/365* = £1.287
SHORT POSITIONS
When the 1-month interbank rate is below 2.5%, this percentage is debited from your account instead.
If 1-month LIBOR is 1.0%, we subtract this from 2.5% charge, meaning the overnight interest rate will be 1.5%.
FOR EXAMPLE
You have sold £5 per point of the US500 rolling cash index at 3580.
The total value of this trade is:
3580 x £5 = £17,900
Remember you only need to have a small percentage of this in your account to open this trade.
If you hold on to this position after 10pm London time, we charge overnight interest.
Say the US500 is valued at 3520 at the point, the calculation is as follows:
3520 x £5 x 1.5/100 x 1/360* = £0.733
How we calculate overnight interest
We calculate overnight interest based on the 1-month interbank rate for the currency you trade in.
LONG POSITIONS
SHORT POSITIONS
If you trade in British pounds, we use the 1-month LIBOR (London Interbank Offer Rate) and add 2.5%.
Say 1-month LIBOR is 1.25%, we calculate the interest rate by adding 2.5% to 1.25% totalling 3.75%.
When the 1-month interbank rate is below 2.5%, this percentage is debited from your account instead.
If 1-month LIBOR is 1.0%, we subtract this from 2.5% charge, meaning the overnight interest rate will be 1.5%.
FOR EXAMPLE
You have bought £2 per point of the UK100
rolling cash index at 6250.
The total value of this trade is:
6250 x £2 = £12,500
You only need a small percentage of this in your account to open your position.
FOR EXAMPLE
You have sold £5 per point of the US500 rolling cash index at 3580.
The total value of this trade is:
3580 x £5 = £17,900
Remember you only need to have a small percentage of this in your account to open this trade.
When you hold this position after 10pm London time, we charge overnight interest.
So, if UK100 is valued at 6265 at this point,
the calculation is as follows:
6265 x £2 x 3.75/100 x 1/365* = £1.287
If you hold on to this position after 10pm London time, we charge overnight interest.
Say the US500 is valued at 3520 at the point, the calculation is as follows:
3520 x £5 x 1.5/100 x 1/360* = £0.733
*There are 365 days in the financial year for UK100 and UK equities, and 360 days for all others.
However, in the case of short positions, you will be credited rather than debited if the 1-month interest rate is above our charge 2.5%.
For example:
- If 1-month LIBOR is 4%, we would subtract our charge of 2.5%, and you would receive a credit based on the value of your trade at 1.5% adjusted for one day.
Overnight interest is a little different for Forex trades
Here we use the difference between the interest rate of the first currency and the second, then apply our charge of 2.5%.
Let’s use the USD/GBP currency pair as an example.
If the USD interest rate is 5% and GBP’s is 1% then the difference is 4%.
If you had bought USD/GBP
You will be credited 4% minus our 2.5% charge for each day you hold the position after 10pm London time.
If you had sold USD/GBP
Instead, you would be charged 4% plus our 2.5% charge for each day you hold the position after 10pm London time.
Overnight interest is a little different for Forex trades
Here we use the difference between the interest rate of the first currency and the second, then apply our charge of 2.5%.
Let’s use the USD/GBP currency pair as an example.
If the USD interest rate is 5% and GBP’s is 1% then the difference is 4%.
If you had bought USD/GBP
If you had sold USD/GBP
You will be credited 4% minus our 2.5% charge for each day you hold the position after 10pm London time.
Instead, you would be charged 4% plus our 2.5% charge for each day you hold the position after 10pm London time.