Research of Retail Traders using Contracts for Differences (CFDs) Outside of the USA.

Mike Richardson on May 9, 2021

Trading Contracts for Differences (CFDs) is illegal for citizens of the USA, prohibited by the CFTC (Commodity Futures Trading Commission) and the SEC (Securities and Exchange Commission), because of concerns regarding leverage and lack of regulation like the underlying stocks, bonds, commodities and currency pairs they represent, are considered over-the-counter (OTC) financial instruments and are heavily regulated by the Dodd-Frank Act.

However, it seems to provide some interesting research data and insights because of recent changes by the European Securities and Markets Authority (ESMA), requiring companies who offer CFDs to retail clients to display a standardized risk warning, disclosing what percentage of their clients are losing money.

Analysis by Forex Ninja in February 2019 looked at 28 of the most popular CFD providers and collated their disclosures:  Data Confirms Grim Truth: 70-80% of Retail Traders are Unprofitable. 

  • It found that on average 76% were unprofitable and 24% were profitable.
  • Reinforcing that trading is not easy and is not a get-rich-quick scheme

At Online Trading Academy we agree!  While the bad news is that the majority are unprofitable, the good news is that there is a minority who are profitable.  The unknown of course is, how educated or not were those traders and investors who's accounts were in the data of the study?  Triangulate that with some other research we have spotlighted recently which is counter to the prevailing belief that retail traders and investors generally lose money:  Different Research Methodology Begins to Change Commonplace Misconception that Retail Traders and Investors Generally Lose Money.

  • This research indicates that the secret is to be in an informed contrarian minority not an uninformed follower majority. 
  • The difference is to be informed about a contrarian methodology through education. 
  • That’s the essence of what we teach with our Core Strategy methodology at Online Trading Academy!

Having served more than 80,000 students with lifelong trading and investing education over more than 20 years, Online Trading Academy is well placed to research that sub-segment of educated retail traders and investors.

The OTA Research Center collects, collates and comments upon public domain research and perspectives that it feels may provide interesting insights.  This content is provided for information only and OTA makes no representations about its accuracy.