Swap, conversion, inactivity: the fees that hit even when you're not trading

Commissions get all the attention because they are the only fee displayed clearly. The spread is already more discreet: it is blended into the price. But three other fees are even harder to spot, because they have nothing to do with the order you place. They land in the background, sometimes overnight, sometimes in months when you do nothing at all.

None of them is illegal. All of them are written in your broker's pricing terms. The trouble is that nobody goes looking.

1. The swap: the price of a night

A position held from one day to the next has to be financed. In forex and CFDs, that financing is called the swap, or overnight fee. It is based on the interest-rate gap between the two currencies, plus the broker's margin, and it is charged every time the position rolls past midnight, server time.

Two details change everything:

• the swap can be positive or negative depending on your direction, but the broker's margin almost always leans the same way;
• in forex, it is usually tripled on one night of the week, often Wednesday, to cover the weekend.

For a strategy that holds positions for several days, the swap can cost more than the spread.

2. Conversion: the commission that won't say its name

Your account is in euros, but you trade a US index or a dollar-quoted pair. Every result has to be converted into the account currency, at a rate that includes a margin, often expressed as a percentage.

This fee almost never appears on its own line. It shows up as an exchange rate slightly worse than the market's.

3. Inactivity: paying to do nothing

Many brokers charge a fixed monthly fee on accounts that have been dormant for several months. The waiting period and the amount vary from broker to broker. The charge keeps running as long as there is a balance left.

It is the most absurd of the three: it hits precisely the careful trader who decided to take a break.

And withdrawals

Some brokers also charge for withdrawals, depending on the payment method or beyond a number of free withdrawals per month. Check before you need to, not after.

Where to find them

Everything is written in two documents:

• the broker's pricing schedule or general terms;
• the Key Information Document that European brokers must publish for every CFD.

Open them, hit search and type four words: swap, conversion, inactivity, withdrawal. Ten minutes of reading, and you finally know what your account costs you on the days you don't look at it.■

A fee you can't see is still a fee you pay.