CFDs are an increasingly popular financial instrument that allow you to bet on price movements without actually owning the underlying asset. With a CFD (contract for difference) you can take large positions in indices, shares, forex, or cryptocurrencies without putting down a lot of money. CFDs are the epitome of high-risk, high-reward investment vehicles.
How Risky Are CFDs?
CFDs are risky enough that US brokers are not permitted to offer them. And many international brokers that do offer them are required to disclose what percentage of their clients have lost money trading CFDs.
These disclosures don’t paint the full picture, but they do offer some real-world results that show just how risky CFDs can be.
As you can see below, the stats are not encouraging. I’ve compiled the data from 15 random CFD brokers that are required to disclose failure rates. With these particular brokers, between 67% and 84% of traders lost money. This data should be more than enough to give any traders pause before they begin to trade CFDs.
|CFD Broker||% of Retail Clients |
That LOSE money
|% of Retail Clients |
That LOSE money
|(Reported 5/30/22)||(Reported 9/15/22)|
About the Numbers
These numbers tell us that the vast majority of CFD traders lose money. With every single CFD broker I surveyed, more than two thirds of their traders lost capital. You don’t have to be a genius mathematician to see that the odds are stacked against you.
The required disclaimer that follows the numbers I compiled above is this: You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
That is extremely sound advice.
What these numbers don’t tell us, however, is the magnitude of the losses or the gains. If a broker has three traders, two of whom lose $1 and one of whom makes $10K, the broker would report that 67% of its clients lost money. Obviously that doesn’t tell the whole story.
And of course the opposite would be true as well. A trader who makes $0.01 didn’t technically lose money and would end up in the winners column. This trader would be weighted equally with a trader who lost thousands of dollars.
We also don’t have any information on the skill levels of the traders. I would guess that the percentage of new traders who lose money would be even higher than 80+%, while experienced, professional traders would fare better.
So take these numbers for what they’re worth. I’ll keep them updated to serve as a resource for anyone who is interested.