Overnight Financing
Holding a CFD overnight means paying (or receiving) a financing fee. The longer you hold, the less you can ignore it.
Risk warning: forex, CFDs, options, futures and crypto assets usually involve leverage or high volatility, and you can lose more than you put in. This lesson only teaches the concepts; all numbers are for illustration and are not investment advice.
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Text version · CFDs, lesson 8: “Overnight Financing”
Holding a CFD overnight means paying (or receiving) a financing fee. The longer you hold, the less you can ignore it.
Settled once every night
overnight financing ≈ position value × annual rate ÷ 365. Longs usually pay; whether shorts receive or pay depends on the benchmark rate and the provider's markup.
The longer you hold, the more it eats
Financing is charged on the full position, not on the margin. Hold for a few months and the total cost can swallow most of the profit.
Build the costs into your plan
CFD costs usually include the spread and overnight financing, and some markets also charge commission. Short-term trades mostly pay the spread; long holds mostly pay financing. Estimate the total cost before opening, then decide whether the trade is worth it.
Key takeaways
- Overnight financing ≈ position value × annual financing rate ÷ 365, charged for each night held.
- Longs usually pay financing; shorts may receive or pay, depending on the benchmark rate and the platform's markup.
- Financing is charged on the full position, and over a long hold the total can eat most of your profit.
Try it yourself
You can do these exercises in this lesson's interactive simulation:
- Click "Example": a $10,000 position with a 7.3% annual long rate. How much is financing per night?
- After the example finishes, look at the chart: on which night is the $300 expected profit used up?
- Switch to "Short" and drag the benchmark rate from 4.8% to 1%: do shorts go from receiving to paying?
- Set the position to $50,000 and hold 365 nights: roughly how much is a year of financing?
Quiz and explanations
- 1. Your position is $10,000 and the annual financing rate is 7.3%. Roughly what's the financing fee each night?
- Answer: $2.$10,000 × 7.3% ÷ 365 = $2.
- 2. What holding period suits CFDs better?
- Answer: Short to medium term.Financing adds up daily, so long holds get expensive.
- 3. For the same $10,000 position at 10:1 vs. 20:1 leverage, the nightly financing fee is…
- Answer: The same, since it's based on position value.Financing is based on position value, not on how much margin you put up.
Terms in this lesson
- overnight financing (Overnight Financing): A fee charged (or paid) at the financing rate for holding a leveraged position overnight, also called a swap fee.
- spread (Spread): The gap between the Ask and the Bid, a hidden cost on every trade.