Cryptocurrency Trading: Overnight Fees Explained

This article is an in-depth look at cryptocurrency trading broker overnight fees. Head on over to our guide on broker fees here!

What are overnight fees?

An overnight fee is the cost you incur for having an open, active trade. You either pay or receive interest on the currency pair that you are trading at a specific time of day.

That’s right – you can actually get paid from these fees (depending on your broker).

Since day trading cryptos is in its early stages, there are many different versions of an overnight fee right now.

This fee is used in other markets, like forex, because you are charged for holding a trade once a day. This is typically at 10pm London time, hence the use of “overnight”.

However, in crypto trading there are different structures in place. It is vital you know about these fees because they will have an impact on your profitability.

You will see a wide range of terms that can quickly become confusing, but in the end they are all an overnight fee. We have compiled a list of the most frequently used ones to help you out:

  • Swap rate/fee
  • Rollover fee
  • Perpetual Contracts
  • Overnight funding/interest

Let’s take a closer look and make sense of it all!

How do overnight fees work?

There are three questions to ask when it comes to understanding how overnight fees work:

  1. When do you pay the fee?
  2. How much is the fee?
  3. Can I have any impact on the fee?

When will you pay?

This depends entirely on the broker.

Typically, you will find that the established brokers will stick to the 10pm London time charge that is once per day.

overnight fees

These are brokers like ActivTrades, Pepperstone, IG – entities that are established in other tradeable markets and follow regulation. (Check out our broker reviews here!)

Where things start to get a bit different is with the new cryptocurrency exchanges and brokers. These entities have different methods of charging overnight fees.

There is a range of different practices which makes it all the more important that you find out what your broker is charging.

Kraken, for example, charges a “Rollover Fee” every 4 hours.

Bitmex has a system they call “Perpetual Contracts” whereby you are charged every 8 hours.

These are just two of many examples for active trade fees that you will come across. So whichever broker you choose, you must find out what the cost for holding an open trade is.

These charges occur at set times which is information the broker will provide.

Overall, you can expect the majority of trading platforms to charge you anywhere from 1 to 4 times in a day.

How much are overnight fees?

Once again, the fee amount will vary and we recommend you check your broker’s fee page. However, this is also where you can receive money instead of just losing it.

Overnight fees are essentially charging you interest for holding open a position. But this charge can actually go in your favour – it really depends on what system your broker has decided to use.

Take a look at this example from Plus500:

Cryptocurrency Overnight Fee percentages

As you can see, with long trades you will be charged, but on short trades you will actually receive money.

Not all brokers do this, but a good portion do. Depending on your preference, you may want to find a broker that does not charge you overnight fees when shorting cryptocurrency.

These fees are reducing with time but they are still one of the areas where crypto traders lose out on some of their profits.

It should be noted that on Wednesdays or Fridays, some brokers will charge a higher overnight fee. This is to cover the weekend as it takes 2 days to process overnight fees.

Whichever day it is, you will want to find out which day it is and at what time so you can avoid taking on this extra, unnecessary cost!

We cannot stress enough the importance of looking through these fees when you are searching for a broker. It will have a big impact on your daily returns.

Can I have any impact on this fee?

Yes – you absolutely can impact whether you take on overnight fees.

As we outlined earlier, when you are charged for having an open trade it is at a specific time.

It is not based on how long you have had the trade open.

Let’s say the broker you use charges a fee at 04:00, 12:00, 20:00 every day (8 hours). If you open a trade at 05:00 and close that trade at 11:00, you won’t be charged any fees.

However, if you held that 05:00 trade for 24 hours, you would be charged three times.

So you can in fact avoid these fees. Better yet, if your broker pays you interest on short trades, you can try to take advantage of that and receive more profits.

Many traders employ this technique when trading and increase their returns. You do have the ability to work around these fees and in the long run it will quite literally pay off!

impact overnight fees

There is another way to impact the overnight fees you take on, although it is limited to a select few.

Most brokerages will offer premium accounts.

These accounts are for traders who are using a large amount of capital in their trading. They will receive reduced fees across the board.

Obviously, this is limited to those who have the ability to trade with large amounts of money.

Interesting how the more money you have, the less you are charged.

Who Uses It?

Almost all brokers will charge an overnight fee, albeit under a different name, frequency, and amount.

You will find that the established brokers largely stick to charging an overnight fee once a day. The newer crypto trading platforms will have a wide range of practices in place.

Some of these are purposefully difficult to work out. In fact, some go out of their way to create an atmosphere of smoke and mirrors to confuse traders. It’s probably best not to trade with brokers that do this.

Protecting your capital is important – don’t allow brokers to take advantage of you.

Currently, the biggest trading platform to not charge overnight fees is Coinbase Pro.

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