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A while ago when EMSA introduced extended risk warnings to show what percentage of retail clients lose money when trading online we did a little feature on whether or not you should choose a broker based on what percentage of their traders lose money?

It was a little tongue-in-cheek, but then again so are some of the risk warnings (cough cough ayondo).

But as a responsible site, we are obliged to highlight the percentages of retail clients that lose money when trading CFDs.

As we’ve just been updating our risk warnings on broker review pages here are the results for the last calculated period of 2023. It’s interesting to see that the percentage of clients losing money trading CFDs has generally decreased.

Risk Warning Loss Percentages Ranked

Broker % of winning traders % of losing traders
Saxo Markets 39 61
CMC Markets 33 67
Interactive Brokers 32.4 67.6
Markets.com 32.3 67.7
IG 32 68
ThinkMarkets 31.69 68.31
City Index 30 70
Spreadex 30 70
Tickmill 30 70
Pepperstone 24.4 75.6
eToro 24 76
FXTM 23 77
XTB 23 77
Plus500 19 81

Are online CFD traders getting better?

All brokers regulated by the FCA that offer derivatives products like CFD trading platforms and financial spread betting must now show what percentage of their clients lose money.

There has never been any doubt that online trading is a high-risk form of speculation, but it wasn’t until the FCA and ESMA insisted that derivatives brokers published what percentages of their clients lost money that people could see exactly how hard.

The percentage stated in risk warnings applies to retail clients only and does not take into account traders who are classified as a professional customer.

Data from provider websites and Finance Magnates

Are traders actually getting better? Or, could it be that brokers are being stricter about which clients they onboard? Probably the later. As the figures are only from FCA regulated CFD brokers.

One also has to ask the question: Have the traders who lose money improved or have they simply switched to offshore unregulated brokers that offer higher leverage for smaller accounts that only exist to make money when their clients don’t?

There has been a significant decline in rouge affiliates introducing clients to regulated brokers. In those cases, scallywags on social media would advertise forex trading dream lifestyles on Instagram. But these scams haven’t gone away.

But, I suspect, the toughened regulation may have had the unexpected negative effect of pushing the most vulnerable, naive and inexperienced traders offshore because they can’t open an account with a decent broker.

We talk a little about this in our piece: Risk Warning. A #FXlifestyle may not be for you.

The figures are as a whole improving and it’s always good to see transparency in high-risk investment products.

What’s also incredible is that of the brokers included in the table above the only broker that has seen an increase in their client loss percentage is eToro. Which bills itself as a social trading platform where other traders can set their account to follow other traders portfolios. Essentially when one trader traders, you copy.

Bit of a shame really as when we interviewed to Yoni Assai a while ago, the focus was on whether or not social trading could replace other forms of fund management.

Should you choose a broker based on what percentage of their clients lose money?

It’s no secret that most traders lose money. It’s also no secret that sports cars are bad investments. Or that 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)…

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 ratio.

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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