Crypto CFDs: bitcoin without a wallet
The lesson covers margin, the overnight funding charge known as a swap, and the fact that crypto markets trade on weekends while most share markets do not. All money figures are in A$.
Contract value and margin on a crypto CFD
A crypto contract for difference is a bet on the price of a coin. You never hold the coin. The platform shows a contract size, a margin rate and a funding line. Your money moves only when the price moves or when a fee is charged. The coin itself never enters or leaves an account.
The contract value is the size of the bet, not the amount you deposit. On a bitcoin CFD, one lot is a set number of coins, and the platform converts that to dollars at the current price. If one lot is one bitcoin and the price is A$90,000, then 0.01 lots has a contract value of A$900. That figure changes as the price changes, so the platform recalculates it for you.
Margin is the deposit the broker locks to hold that position open. It is a percentage of the contract value, not a fee. At a margin rate of 20 per cent, a A$900 contract value needs A$180 of margin. The rest is borrowed from the broker. Margin rates are set by the broker and vary between brokers. A higher rate means more of your own money is tied up.
Funding charges that apply every night
A swap is a charge for holding a position overnight. It is not a commission on the trade. It is added to the account each night the position stays open. The charge applies whether the price went up or down. A small position can still lose money to the swap if it is left open for long enough.
The swap is quoted per night, per position. A charge of A$0.30 per night on a small bitcoin position becomes A$0.90 over three nights. Over a weekend, some brokers apply three nights of funding at once because the market does not settle in the usual way on Saturday and Sunday. The exact number of nights and the exact charge are set by the broker and vary between brokers.
The funding line sits next to the position on the platform. It shows the swap rate and sometimes the next charge time. If the expected price move is smaller than the swap plus the spread, the trade starts behind. That does not mean the trade will lose. It means the price has to move further just to cover the cost of holding it.
Weekend hours and wider spreads
Crypto markets trade on weekends. Most share markets do not. That means a bitcoin CFD can move on a Saturday while the underlying share market is closed. The platform may still quote a price, but the number of buyers and sellers is lower. Fewer participants often means a wider spread.
The spread is the gap between the buy price and the sell price. On a quiet weekend, that gap can be wider than on a weekday. A wider spread makes it more expensive to open and to close a position. The platform shows both prices, so the gap is visible before you click. It is not a fee added later. It is built into the quote.
The broker may also change its trading hours for crypto CFDs. Some brokers close the instrument for part of the weekend. Others keep it open but quote a wider spread. The hours and the spread are set by the broker and vary between brokers. A position left open over the weekend can move while you are asleep, and the swap is added whether the price moved up or down.
Bitcoin CFD: margin and swap on 0.01 lots
| Step | Amount | Note |
|---|---|---|
| Lot size | 0.01 lots | the smallest position size the platform quotes for this instrument |
| Contract value | A$1,000 | 0.01 lots x A$100,000 per lot, the platform's stated contract size |
| Margin at 20 per cent | A$200 | A$1,000 x 0.20, the margin rate the broker sets for this instrument |
| Spread cost | A$5 | a 0.50 per cent spread on A$1,000, charged once on entry |
| Swap per night | A$0.30 | an illustrative funding charge; the actual rate varies between brokers and changes daily |
| Swap over a weekend | A$0.90 | three nights of funding, because many brokers apply a triple charge on one weekend day |
The broker may round the swap, add a commission, and quote a wider spread outside its main hours. Margin rates and funding rates are set by the broker and vary between brokers.
Doing it once, step by step
This walkthrough shows how to read the numbers on a small bitcoin CFD before you open it, using a A$900 contract value and a 20 per cent margin rate. You will work out the margin, the swap for a weekend, and the spread cost in A$.
- 01
Find the contract value
Open the instrument details on the platform. Look for the contract size and the current price. Multiply them to get the contract value. For 0.01 lots at a price that gives A$900, the contract value is A$900. This is the number the margin is calculated from, not the amount you deposit.
- 02
Calculate the margin
Find the margin rate for the instrument. It is shown as a percentage. Multiply the contract value by that percentage. At 20 per cent, A$900 x 0.20 = A$180. That A$180 is locked while the position is open. It is not a fee, but it cannot be used for anything else.
- 03
Read the swap line
Look for the funding or swap line next to the position. It shows a charge per night. Write it down. If it says A$0.30 per night, then three nights cost A$0.30 x 3 = A$0.90. Check whether the broker charges extra nights for the weekend. That detail is on the platform and varies between brokers.
- 04
Check the spread
Look at the buy price and the sell price. The difference is the spread. On a weekend, it may be wider. If the buy price is 90,010 and the sell price is 89,990, the spread is 20 dollars. That gap is a cost you pay when you open and when you close. It is not listed as a separate fee.
- 05
Add the costs before you decide
Add the swap for the expected holding period to the spread. If you plan to hold over a weekend, use the weekend swap. Compare that total to the price move you expect. If the expected move is smaller than the swap plus the spread, the trade starts behind. The price must move further just to break even.
- 06
Check the funding before you enter
Read the funding line one more time before you click. Confirm the swap rate and the next charge time. If the position is small and the swap is large relative to the expected move, consider a shorter holding period. The fix is to work out the weekend cost in A$ first, then decide.
The mistake most people make here
The common mistake is to treat a crypto CFD as if it were the coin itself, and to leave a small position open over the weekend without checking the funding charge. The position can move while the reader is asleep, and the swap is added whether the price moved up or down. The fix is to read the funding line before entering, and to work out the weekend cost in A$ first. If the expected move is smaller than the swap plus the spread, the trade starts behind.Check yourself
A position of 0.02 lots has a contract value of A$2,000. At a margin rate of 20 per cent, what margin is required?
A$2,000 x 0.20 = A$400.
The same position pays A$0.30 per night in swap. What is the funding cost for three nights?
A$0.30 x 3 = A$0.90.
On AUD/USD, one pip on one standard lot is 10 units of the quote currency. At a rate of 0.6640, what is that in A$?
10 x 0.6640 = A$6.64. The figure varies with the exchange rate.
Questions that come up next
Why does the platform show a contract value that keeps changing?
The contract value is the size of the bet in dollars, not the amount you deposit. On a bitcoin CFD, one lot is a set number of coins, and the platform converts that to dollars at the current price. When the price moves, the dollar value of the same number of coins moves with it. The platform recalculates the contract value for you, so the figure on screen can change while the position is open.
Is the swap charged even when the price does not move?
Yes. The swap is a charge for holding the position overnight, not a commission on the trade. It is added to the account each night the position stays open, whether the price went up, down or stayed flat. A small position can still lose money to the swap if it is left open for long enough. The funding line on the platform shows the swap rate and sometimes the next charge time.
Why might a weekend cost more than one night of funding?
Crypto markets trade on weekends, but the usual settlement cycle does not run on Saturday and Sunday. Some brokers apply three nights of funding at once to cover the weekend. The exact number of nights and the exact charge are set by the broker and vary between brokers. It is worth checking the funding line before the weekend rather than after.
What does it mean if the spread is wider outside main hours?
The spread is the gap between the buy price and the sell price. When fewer people are trading, that gap often widens. You pay the spread when you enter and when you exit, so a wider spread makes the round trip more expensive. On a crypto CFD, the platform may quote a wider spread outside its main hours. That cost sits alongside the swap.
If the expected move is smaller than the swap plus the spread, is the trade a loss?
No. It means the price has to move further just to cover the cost of holding the position. The trade starts behind by the amount of the swap plus the spread. That does not predict the outcome. It simply sets the distance the price must travel before the position is ahead of those costs.
Do margin rates and funding rates change between brokers?
Yes. Margin rates and funding rates are set by the broker and vary between brokers. A higher margin rate means more of your own money is tied up to hold the same contract value. A higher swap means the position costs more to hold overnight. The platform shows the rates that apply to your account.
The words used on this page
- contract for difference
- A contract that pays the difference in price between when you open and when you close. You never own the coin or share. The platform shows a contract size, a margin rate and a funding line.
- margin
- The deposit the broker locks to hold a position open. It is a percentage of the contract value, not a fee. The rest is borrowed from the broker.
- swap
- A charge for holding a position overnight. It is added to the account each night the position stays open. The charge applies whether the price went up or down.
- spread
- The gap between the buy price and the sell price. You pay it when you enter and when you exit. It can widen when fewer people are trading.
- contract value
- The size of the bet in dollars, not the amount you deposit. On a bitcoin CFD, one lot is a set number of coins converted to dollars at the current price. It changes as the price changes.
What to take away
- A crypto CFD is a contract on the price, not the coin: no wallet, no transfer, and no ownership.
- Margin is a deposit, not a fee, and it varies between brokers.
- The swap is charged every night the position is open, whether the price moves up or down.
- Crypto markets trade on weekends, and some brokers apply three nights of funding at once.
- If the expected move is smaller than the swap plus the spread, the trade starts behind.