When brokers advertise now they have to display what percentage of their client base lose money. So should that determine who you trade with?
It’s no secret that most traders lose money. It’s also no secret that sports cars are bad investments. Or that some cryptocurrencies may not have been all they were cracked up to be. Or that… No wait, some people do make money buying sports cars (not boats though – boats should definitely come with depreciation risk warnings painted on)…
There are loads of good features about trading win/lose ratios out there so I’m not going to go into the percentages. But if you’re interested you can see the stats on Finance Magnates here.
Or, you may not have noticed because risk warnings, much like the banner adverts they are featured on are largely ignored. In fact, I would say that risk warnings nowadays are fairly pointless.
Ten years ago when you could open an account online and start trading on 500:1 in five minutes, they served a purpose to pre-warn customers of the dangers of trading.
But now, you actually have to demonstrate you understand the risks of derivatives via interactive quizzes during the account opening process. If you don’t you can’t get any leverage, unless you go offshore. Which a lot of traders are. Which has been counterproductive because it means they will probably get more leverage some bucket shop broker regulated by a little island in the middle of the Pacific.
Looking through the list of brokers where clients have a higher win percentage it’s pretty obvious that the rankings are pointless as a form of choosing a broker. There are some good brokers up there and also some terrible ones who have a good win ration.
Also, the static is flawed in so many ways.
For instance the majority of brokers work off a 80/20 basis. Which means that 20% of a broker’s client base will generate around 80% of the revenue. The other 20% don’t really do much business so skew the stats. It would be interesting to see what percentage of a brokers top 20% of clients make or lose money.
What is also quite interesting is that even though such a high percentage of customers lose money, a high proportion of trades are (or were) actually profitable. This suggests that it’s not so much picking the winners for traders which is the problem, but actually managing effective trading strategies.
So, what will be interesting (if this marketing rule remains) will be to see which brokers educate their clients more to help them improve their trading strategies.
But, CFD or spread betting brokers can provide neither advice nor implied advice to their client base, so really it’s completely out of their hands.
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