Learn · Stage 3: Choose a broker safely · guide 3 of 5
Trading costs, leverage and margin explained
Every trade has a cost, and leverage changes how fast money can be lost. Understand both before you trade with real money.
The main costs:
- Spread — the gap between the buy (ask) and sell (bid) price. You pay it on every trade. Spreads can widen at busy or quiet times, such as around news or when a market opens.
- Commission — some accounts charge a fee per trade, instead of or as well as the spread.
- Overnight financing (swap) — a charge (occasionally a small credit) for keeping a position open past the daily cut-off time.
- Other fees — for example deposit, withdrawal, currency-conversion or inactivity fees. Read the broker's fee page before you open an account.
Leverage lets you control a position larger than your deposit. With leverage of 30:1, a deposit of 100 can control a position worth up to 3,000. Leverage makes losses grow just as fast as gains.
Many regulators limit leverage for retail clients — for example, the UK, the EU and Australia cap major currency pairs at 30:1. Some offshore firms advertise far higher leverage; treat that as a reason for more caution, not less.
Margin is the part of your balance set aside to keep a position open. If losses take your account below the required margin, you may receive a margin call, and your positions can be closed automatically (a "stop out") — usually at a loss.
Negative balance protection means you cannot lose more than the money in your account. In some places, such as the UK, the EU and Australia, regulators require it for retail clients trading CFDs; elsewhere it may not apply. Check the terms of the exact company you sign up with.
Deposits and withdrawals:
- use a payment method in your own name;
- check withdrawal fees, limits and how long withdrawals take;
- be very careful if anyone asks you to pay a "tax", "release fee" or "insurance" before you can withdraw — this is a common scam sign.
A simple example: if you open and close ten trades, you pay the spread ten times before price has moved in your favour at all. Watch how costs add up on a demo account before you trade real money.
Continue in the course: the Foundation Course — start free, 14 days, no card
Trading involves significant risk of loss. Practise on a demo account first. Holy Trading Science provides education, not financial advice.