How to Stop CFD Spreads From Eating Your Profits
Summary: “Zero Commission” doesn’t mean free. This article exposes the hidden math of widened spreads and shows you how much of your “pie” is being eaten by your broker and how Direct Market Access (DMA) lets you keep what you earn.
The Frustration: A Winning Strategy with a Losing Balance
You’ve put in the hours. Your discipline is solid. You’re hitting 55% or 60% of your trades. By every rule in the book, you should be printing money.
But instead of growing, your P&L is slowly bleeding. You think your risk management is off. You also think you need to tweak your strategy. Then you look everywhere – except at the real problem: The Leak.
The Problem: The “Zero Commission” Trap
Everyone loves the sound of “zero commission.” But in trading, if the execution is free, the cost hasn’t disappeared – it’s just been moved to the spread.
CFD brokers often “internalise” your trade and artificially widen the gap between the Buy and Sell price.
- The Reality: While the real market spread might be 1 or 2 cents, your CFD broker might widen it to 10, 20, or even 40 cents.
- The Conflict: There is no “single truth” in CFDs. You have no way to verify the real price, leaving the door wide open for the broker to take a massive bite out of your trade before you even start.
The Math: Pie Crumbs, Not Full Pie
Let’s look at a 100-unit trade of SPY (one of the most liquid ETFs in the world):
- The DMA Route: You interact with the real market (NBBO). The spread is $0.01. Cost to enter: $1.00.
- The CFD Route: The broker widens the spread to $0.40. Cost to enter: $40.00.
The Impact on You: You are instantly $39.00 behind the exact second you click buy. You have to wait for the market to move 40 cents in your favour just to break even. If you take 10 trades a week, that’s $1,560 a month in “invisible” costs.
The Real Cost to You: Death by a Thousand Cuts
Trading costs don’t just trim a little off the top – they pile up against you like a leaky pen in your pocket.
- Invisible Losses: Your account statement rarely shows a “spread” line item. You only notice it when your balance refuses to grow despite winning trades.
- Fast-Compounding Costs: 10 round-trip trades a day at a 2-pip spread costs you 400+ pips a month. On a $10,000 account, that is roughly $400 a month gone and nearly 48% of your capital per year eaten by spreads, not bad trades.
- The Year-End Gap: If your strategy earns 2% monthly, you should have $12,682 after a year. But with a 1% monthly spread cost, you end up with $11,268. You just lost $1,414 to your broker’s “free” platform.
The Solution: Why Direct Market Access (DMA) Changes Everything
Moving to DMA is like taking off a blindfold. It doesn’t magically make you a better trader, but it strips away the friction holding you back.
| Feature | Retail CFD Broker (The Leak) | Alaric DMA (The Net) |
| Pricing | Artificially widened (Marked up) | Raw Exchange Spreads |
| Cost Visibility | Hidden in the price (Invisible) | Transparent, Flat Commission |
| Broker Alignment | Profits when you lose | Wins when you trade (Pipeline) |
| Slippage | A “one-way street” against you | Positive Price Improvement |
The Switch That Pays for Itself
When you route through Alaric Securities, your order goes straight to the exchange. You see the raw market feed with no mark-ups. Stop battling artificial spreads and start focusing 100% of your energy on the market itself.
You pay a straightforward, boring commission. It’s predictable and you know exactly what the “toll” is before you even put your car in drive. See Our Transparent Pricing.
The Choice is Yours
You can keep letting hidden spreads eat your pie until only crumbs are left or you can switch to a transparent, professional pipeline where you keep the “alpha” you work so hard to generate.
Stop the Bleed. Switch to DMA.