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ABC-s of investment

A CFD (Contract for Difference) is a trading instrument, which allows a leveraged position to be taken in relation to underlying assets (for example, a share or index). For example, in the case of the shares of large companies a CFD position can generally be taken 1:5 leverage, i.e. a 10,000 € position requires that you have a minimum of 2,000 € in own funds on your account. Stock market indices generally use even greater CFD leverage.

A CFD permits both long and short positions to be taken in terms of base assets, i.e. a bet to be made on the rise as well as the fall of the underlying asset.

Transaction fees are applicable for share CFD transactions, which are similar to share transaction service fees. For example, the transaction fee for US stock exchange shares is 0.03 $ per share (a minimum of 20 $ per transaction). Since the CFD is a leveraged instrument, the client also pays an interest fee for CFD positions held overnight, which is approx. 3-5% per year, depending on the exchange and the interest environment.

Positive scenarioNegative scenario
Cash equity balance on the account prior to the trade2,050 €2,050 €
Underlying assetBMW shareBMW share
Amount of initial position10,000 €10,000 €
Required equity capital2,000 €2,000 €
Holding period5 days5 days
Share change during the holding+5%-5%
Transaction fee on entry (0.14%, min. 12 €)-14.0-14.0
Transaction fee on exit (0.14%, min. 12 €)-14.7-13.3
Interest charge for overnight holding (4 nights, 3% per year)-3.3-3.3
Profit/loss from the position500-500
Cash equity balance post trade2,518.01,519.4

Specific terms and conditions can be found in the price list and the trading platform.

Currency trading (FX Spot instrument) allows for bets to be made on exchange rate fluctuations. FX Spot is a high leverage instrument, which allows the trader to generally trade with leverage of 20 to 40 times.

  • For example, betting on fluctuations involving the EUR-GBP currency pair, it is possible to use leverage of 30 times. Therefore, in order to assume a 50,000 € position, it is necessary to have at least 1665 € in cash equity on your account.

FX Spot allows both long- and short-term positions to be taken in relation to a currency pair. For example, when purchasing EUR/USD FX Spot you are betting on the strengthening of the Euro in relation to the Dollar and when selling EUR/USD you are betting on the strengthening of the Dollar in relation to the Euro.

Transaction fees apply to FX Spot transactions in the event that the size of the position remains smaller than the commission threshold. For example, in the case of the EUR/USD the threshold is a 50,000 € position, i.e. in the case of larger transactions a separate transaction fee does not apply. It should be noted that there is always a spread between the purchase and sale prices of an instrument. This means that in order to earn a profit the price of the position must change enough to offset the given spread.

  • For example, at the same time the EUR/USD purchase (ask) price may be 1.1709 € (price, at which the client purchases) and the sales (bid) price is 1.1707 (price, at which the client can sell), in which case the range is 2 points (one point = a pip, i.e. the smallest digit in the price of the currency pair). When purchasing at the purchase price and selling the position at the sales price at the same moment in time, the position loses 0.017% (1,1707/1,1709-1) of its value, which means that in order for the position to become profitable the market price of the currency pair must rise by more than 0.017%.

Interest income or interest charges shall be applied to overnight positions based on the interest environment for associated currencies (Tom/Next swap points). If the client has a long position, for example, in US dollars, where the interest rates are significantly higher than in a short position currency, for example, the Euro, then the client may earn interest income on the position (and vice versa). In addition, interest income or interest charge shall be calculated for the profit/loss of the position based on the interest environment for the currency (financing interest). The acquisition cost of the position shall be adjusted by the revenue and expenditures associated with maintaining the position, which in turn affects the gain or loss of the position.

Additional information on the functioning and costs of FX Spot can be found in the key information document (KID) for the instrument, the trading rules, the price list and the trading platform.

Platform and trading

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How to use LHV Broker?

Price list

Minimum account assets

500 €

Management fee

Free of charge

Transaction fee

Depends on the account price list

The price list is informative and may differ from the prices and conditions presented on the trading platform LHV Broker. Complete price list is available on the LHV trading platform. LHV Trader enables trading in high-risk instruments and this may not be suitable for every investor. In order to apply for a product, an appropriateness questionnaire must first be completed, determining the products that are appropriate for you. You can fill in the questionnaire in LHV internet bank.

Ask for advice

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With urgent matters we help until 23.00

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82% of retail investor accounts lose money when trading these instruments with LHV Broker. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.


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