Trading
ByOddmund GroetteTrading
What percentage of CFD traders lose money? Our informal survey suggests that between 62% and 82% of all retail CFD traders lose money. The best CFD broker has “only” 62% losing traders, while the worst has 82%.
These are pretty depressing numbers! The failure rate is very high, but as you’ll understand after reading this article, the odds are stacked against you if you dream of making money on CFD trading.
In this article, we look at the broker statistics for 13 CFD brokers we picked at random. Even though we gathered just a small sample (there are many CFD brokers), we believe this is a very correct generalization of what you can expect if you surveyed all hundreds of them.
First, let’s look at the statistics and then later we’ll explain why the odds are stacked against you:
Table of contents:
What percentage of CFD traders lose money?
Let’s look at CFD trading and profitability in more detail.
The table below summarizes 13 random brokers and what percentage of CFD traders lose money.
The table is based on the latest numbers from the broker’s website. CFD brokers are required by law to report the percentage of losing CFD traders, so this is easily accessible data.
Here’s the table:
| % losing traders | |
| FXPro | 82 |
| Capital.com | 79 |
| Plus 500 | 78 |
| XTB | 77 |
| AvaTrade | 76 |
| IC Markets | 76 |
| FX Flat | 75 |
| Pepperstone | 74 |
| CMC Markets | 71 |
| FXCM | 71 |
| IG | 71 |
| Forex.com | 68 |
| Interactive Brokers | 62 |
The worst broker has 82% losing CFD traders while the best has 62% (Interactive Brokers – IB).
We are not surprised that IB has the best statistics. We suspect IB attracts better and more sophisticated traders than the others. 62% losing traders is still a lot, but still significantly better than all the others.
IB grows mainly via word of mouth, and you are less likely to find naive and newbies there. We are using IB ourselves, and Interactive Brokers is a great broker except for the terrible support. Please also have a look at our analysis of Interactive Brokers vs. Saxo Bank (if you are serious about trading).
Based on the conclusions above, you might understand we are no fans of CFD trading. You have many obstacles to overcome if you dream of striking it rich as a CFD trader:
Why CFD traders are likely to lose money
Why would you trade CFDs? We believe it’s a terrible idea. Let’s have a look at why:
CFDs are a zero-sum game
CFD trading is a 100% zero-sum game: your gain is someone else’s loss (or vice versa). CFDs are derivatives and thus just a contract between you and someone else with the broker acting as a counterparty (and you most likely lose if the broker goes belly up).
Leverage
CFDs allow traders to magnify their positions using leverage, which means they can control a larger amount of capital with a smaller initial investment.
However, this also amplifies their losses if the market moves against them. And sooner or later the market does go against your position.
Most CFD traders trade CFDs because they are undercapitalized. If you are, you better save what little you have and invest for the long term.
Hidden fees and charges
CFD brokers normally don’t charge commission but make money on the bid and ask prices. Most traders have no clue how much this costs, but it’s significant.
Moreover, the rules might change if the markets turn nasty. Suddenly the spread widens if the volatility goes up.
Illiquidity
CFDs based on illiquid assets may experience wider spreads and price gaps, which can amplify losses.
Lack of knowledge and experience
Very few professional traders trade CFDs. Most traders are retail, and many have no clue what they are doing, which increases the likelihood of making poor decisions.
No trading plan
Because most traders are retail traders, they have no trading plan.
We believe a bad plan is better than no plan at all.
Traders lose money
In general, traders are likely to lose money. For example, only between 1-20% of day traders make money. Likewise, between 70-90% of short-term traders fail.
