Trading is hard. So hard that recent data disclosed by trading platforms show that, on average, less than 1 out of 4 retail traders make money.
Outside of the U.S., forex is commonly traded by retail traders using Contract for Differences (CFDs).
If you’re not familiar with CFDs, a CFD is a contract entered between a trader and a CFD provider. CFDs allow traders to speculate on rising or falling prices in an underlying currency pair (along with other underlying markets like indices, shares, commodities, and crypto).
Due to the recent measures adopted by the European Securities and Markets Authority (ESMA), companies that offer CFDs to retail clients are now required to display a “standardised risk warning, including the percentage of losses on a CFD provider’s retail investor accounts.”
Basically, trading platforms are forced to be more TRANSPARENT and now have to disclose what percentage of their clients are losing money.
At the bottom of each CFD provider’s website, they display a message that looks something like this:
Please note that CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. X% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.
Here’s an actual example:
I was curious to know what the numbers were across different CFD providers.
To be clear, the number displayed consists of ALL types of CFDs traded, not just forex, but I thought it would still give a pretty good idea of how retail traders fare in general.
I looked at the websites of 28 of the most popular CFD providers and discovered that the percentage of losing accounts ranged between 54% and 83%, with the average being 76% in the red.
That means less than 1 out of 4 traders make money.
Here’s a chart showing just the percentage of losing accounts for each specific CFD provider.
Winning vs. Losing Client Percentages
In an attempt to temporarily blind you with bright colors, the charts below breaks down the actual percentages between winning and losing retail accounts for each CFD provider.
This chart displays CFD providers in alphabetical order.
This chart below sorts CFD providers who have the highest percentage of winning retail accounts to the lowest.
I’m not trying to pick on a specific trading platform here. It’s not necessarily their fault that their clients are losing money.
My point in showing this data is to emphasize that is trading is NOT easy.
The data shows that it is NORMAL for 70-80% of traders to be unprofitable.
Said differently, out of every 10 traders, only 2-3 traders succeed!
If you’re a new trader, I’m not trying to discourage you. But here at BabyPips.com, we want to make sure your expectations are realistic.
Don’t be fooled by the “forex traders” posting videos of themselves chillin’ in their Versace furnished luxury penthouse suites, driving their Lamborghini Huracán, while flossin’ their Rolex Submariner and rockin’ Gucci slides.
That said, check out my ride. I started trading micro lots and now look at what I drive! All because of forex trading! If I can do it, so can you!
Yeah right. I don’t own this car. Were you not paying any attention to what I just said…
It is not easy to make money trading forex.
Or stocks. Or crypto. Or commodities. Or indices. Or bonds. Or <insert tradeable asset here>.
Forex trading is not a get-rich-quick scheme. Trading is a skill that takes TIME to learn.
We emphasize these points repeatedly in our School of Pipsology.
If you were thinking about getting rich quick through trading, this data should make you think twice!
If it makes you feel any better, becoming a professional basketball player is even harder.
For men, about three out of 10,000 male high school basketball players will be drafted into the NBA, or about .03 percent. For women, around one out of 5,000 players, or .02 percent, will be drafted into the WNBA.
Did you know that the five deadliest factors that cause traders to fail are self-inflicted? Learn about the 5 Things That Traders Do to Guarantee Their Own Failure.
If you’re interested in seeing the raw data in table form, enjoy!
|CFD Provider||% Unprofitable Accounts|
|Saxo Capital Markets||72.00%|
*Data from 01/31/2019 so current numbers could be different.