Any new forex trader is naturally curious about what percentage of traders are profitable. The most common questions are “How many forex traders make money?” and “how risky is forex trading?” 🤔 These questions can finally be answered accurately.
For the first time in the history of trading, thanks to the new European regulations that came into effect from August 1, 2018, European brokers required to show what is the percentage of their clients that lose 💵 This applies to all broker traded CFD’s (forex, stocks, commodities, etc.)
Best Forex Brokers Available Today
What Percentage of Forex Traders Lose Money?
As you can see from the forex broker comparison table above 👆 the amount of winning traders can vary widely among different companies. eToro for example, has one of the smallest amounts of losing accounts at 75%, meaning 25% of traders depositing there are making money. When you consider that eToro traders winning rate is roughly 3 times more than the worst-performing brokers, it demonstrates why choosing your trading platform carefully is so important.
Check out our video if you want to know why traders lose more money with some brokers and less with others 👇
There are several factors which may contribute to eToro’s impressive figures. Firstly, unlike many brokers, they have pioneered the use of social trading. 👍 Users can interact with other users and even copy their trading strategies using eToro’s pioneering use of a “copy” feature which allows beginners to learn from and mimic other successful traders on the platform. Given the disparity in winning percentage, it appears this really works.
‼️ At the other end of the table, the worst brokers could be down there for many reasons. Whether it be because they prey on inexperienced traders, have high costs or don’t provide enough education or training tools, the stats don’t lie. If 89% of users are losing money trading with a particular company, then new forex traders need to be wary of that fact. ‼️
What is ESMA?
If you are not in the mood to read, just watch our Youtube video to understand What the new ESMA regulations mean for you 👇
Anyone getting into forex trading has probably heard the saying that 95% of participants lose money. Given that brokers were able to hold tightly onto these statistics, the 95% to 99% estimations were precisely that, just estimations.
Now, however, given the implementation of stricter regulations designed to protect retail investors by ESMA (European Securities & Market Authority), it is a legal requirement that a broker displays the winning percentage of its clients.
To discover this ESMA required information, look for a statement like “75% of retail investor accounts lose money when trading CFD’s with this provider” on any marketing material or advertisements from the broker.
To reduce the financial risk for retail traders, ESMA has introduced leverage limits for European brokers. Gone are the days when small clients could trade with 100x or 200x their deposited funds.
According to the new ESMA intervention measures, leverage rates can only be offered between a margin of 2:1 and 30:1, depending on the specific instrument.
The new leverage limitations are as follows:
👉 30:1 for major currency pairs (such as EUR/USD)
👉 20:1 for non-major currency pairs (such as EUR/NZD), gold and major indices
👉 10:1 for commodities with the exception of gold and non-major equity indices
👉 5:1 for CFD stocks
👉 2:1 for cryptocurrency CFD
As you can see from the list, average volatility dictates how much leverage can be utilized. For this reason, cryptocurrencies, typically the most volatile asset, have the tightest leverage cap, while conventional forex pairs can use the maximum 30:1 margin when trading.
How To Choose Your Forex Broker
Choosing the right forex broker is an important decision, so what exactly should you be looking for beyond the winning/losing percentage that we discussed earlier? Firstly, you need to look for low fees. The cost of trading adds up in the long term and can eat into any profitable edge that you might have if you aren’t careful. There is good news here, as due to competition, most forex brokers offer competitive spreads with no commission.
Next, it’s important to consider how many different currencies are on offer. Professional traders will look for opportunities across a vast array of forex pairs, and having these options can help you be more selective, and therefore more effective in your trading. Another important consideration is what technical tools are available. While you don’t necessarily need hundreds of fancy indicators, at the very least you need clear and readable charts.
Finally, and perhaps most importantly, you need to find a company that makes it straightforward to deposit and withdraw money. There’s nothing worse than having long delays while waiting for your funds to arrive, or if the broker is stalling on a withdrawal.
Best Brokers In 2019
If you consider all these factors, it will help you to make the best possible decision when choosing which broker you deposit with. To make the process even easier, we have researched this for you.
🏆 Best Overall: eToro 🏆
When you consider the hard numbers, it’s almost impossible not to put eToro at the top of the pile. The statistics don’t lie, and more traders are profitable there than at any of the other brokers we checked out. Whether it’s thanks to its social platform or copy trade feature, eToro seems to be doing it right. With over 5 million users in a whopping 140 different countries around the world, this award-winning company has created a user-friendly platform that is as simple to use as any broker out there.
75% of retail accounts lose money
After eToro it becomes more difficult to separate the different companies, as they are mostly alike. However, there are some key differences in the areas of technical tools and ease of use, which allow us to differentiate between them.
👏 Honorable Mention: Plus 500 👏
While Plus 500 does not boast an above-average amount of winning traders, it is still a good option for a beginner trader. Boasting a great array of forex pairs, and an easy to use platform, most importantly this is a well regulated and well known CFD broker. Plus 500’s UK subsidiary is regulated by the FCA in the United Kingdom, widely considered the gold standard for financial regulators in the world.
76.4% of retail accounts lose money
👏 Honorable Mention: Easy markets 👏
Easy markets excel in the area of trader education, with a vast array of resources available to anyone who deposits with them. This broker goes out of their way to make its platform simple to use. The main reason it makes our list is that it offers forex options, which are very difficult to find among retail brokers. This trading instrument can be used to control risk and manage losses better, and therefore can be a great option for anyone getting started in FX.
76% of retail accounts lose money
👏 Best for US traders: Robinhood 👏
Among the many US brokers, Robinhood is a breath of fresh air. The San Francisco based company bases its ethos on saving its clients money, and providing services for anyone, no matter how much money they have to trade. While they don’t have forex, Robinhood offers commission free stock, cryptocurrency, ETF and options trading with no minimum account deposit. The platforms charts are clean and clear with no confusing frills. While some have complained about a lack of educational materials, this broker has made great strides in this area, adding notable research firm Morning Star’s stock reports to their premium “Gold” service (leveraged trading is also available). All of these factors make Robinhood a great choice, particularly for a young trader getting started due to their low fees and no capital requirements.
Make sure you check out our list and try each broker’s demo platforms before you invest any money in the markets. Finding a well-regulated broker will save you a huge amount of stress 🤯 and most importantly, will mean your risk capital has the best chance of being looked after safely. As we can now see from the ESMA data, it pays to find the right broker.