Spread betting is an exciting, but risky, method of trading financial markets. Unlike traditional investing, you are betting on price movements without owning the underlying assets. While it offers tax advantages, most notably being exempt from Capital Gains Tax in the UK, the reality is that the vast majority of retail traders are unsuccessful. This article delves into the percentage of profitable spread bettors, focusing on the risk warnings disclosed by major brokers as of October 2024.
How many Spread Bettors Are Successful?
Risk Warning Data from Major Brokers
The Financial Conduct Authority (FCA) requires brokers to display the percentage of retail investor accounts that lose money when trading CFDs and spread betting. Below is the most recent data from October 2024:
| Broker | % of Retail Investors Losing Money | Offers Spread Betting | Offers CFDs |
|---|---|---|---|
| Plus500 | 80% | No | Yes |
| Oanda | 76.6% | Yes | Yes |
| FXPro | 75% | No | Yes |
| Pepperstone | 75.1% | Yes | Yes |
| City Index | 71% | Yes | Yes |
| Markets.com | 69% | Yes | Yes |
| ActivTrades | 69% | Yes | Yes |
| SpreadEx | 64% | Yes | Yes |
Analysis of Broker Data
From this data, we can observe that the average loss rate among these brokers ranges from 64% at SpreadEx to 80% at Plus500. The reasons for the differences in loss rates can vary based on the level of leverage offered, the types of clients they attract, the trading platform itself, and the range of assets provided. However, across the board, the majority of retail investors lose money while spread betting or trading CFDs.
- Plus500 shows the highest percentage of losing accounts at 80%, likely reflecting its appeal to less experienced traders due to its easy-to-use platform and high leverage options.
- Oanda follows with 76.6% of traders losing money, despite its strong platform and reputation.
- SpreadEx has the lowest percentage of losing traders at 64%, which is significantly lower than the industry average, possibly due to its long-established client base and range of risk management tools available for spread bettors.
Why Do So Many Spread Bettors Lose Money?
Spread betting offers the allure of tax-free profits, but the reality is that leverage and volatility significantly increase the risk of losses. Here are some key factors contributing to the high percentage of losing accounts:
- Leverage: Spread betting allows traders to control large positions with small amounts of capital, which amplifies both profits and losses. A minor market move can wipe out a leveraged position, especially if proper risk management strategies are not used.
- Market Volatility: The financial markets can be highly volatile, with price swings triggered by economic data, geopolitical events, and market sentiment. Without a solid strategy, traders can quickly find themselves on the losing side.
- Lack of Risk Management: Many retail traders fail to implement robust risk management, such as using stop-loss orders, limiting their leverage, or properly diversifying their positions.
- Emotional Trading: Emotional decisions often override strategic thinking, leading to overtrading, holding onto losing positions, or exiting profitable ones too soon. This is one of the most common causes of trading failure.
Calculating the Average Loss Rate
To understand the profitability of spread bettors specifically, we need to look at brokers that exclusively or predominantly offer spread betting services. From the table above, SpreadEx stands out as one of the few brokers that focuses almost solely on spread betting, reporting a 64% loss rate. This figure is considerably better than the industry average, which typically ranges between 70% and 80% for retail traders.
Other brokers, such as Pepperstone and City Index, also offer spread betting alongside CFDs. These brokers report loss rates of 75.1% and 71%, respectively, indicating that while spread betting remains a challenging activity, some traders are able to find consistent success—albeit a minority.
The Average Loss Rate Among Spread Bettors
If we average the loss rates across brokers that offer spread betting (excluding those that exclusively offer CFDs), we get the following:
- (76.6% + 75.1% + 71% + 69% + 64%) / 5 = 71.14%
Thus, the average loss rate for retail spread bettors is 71.1%, meaning that only 28.9% of spread bettors are profitable on average.
How Many Spread Bettors Are Profitable?
Based on these statistics, if we apply this average loss rate to the number of active spread bettors in the UK, we can estimate how many traders are consistently successful.
According to estimates, there are roughly 327,273 active spread bettors in the UK. Given the average loss rate of 71.1%, this means that:
- Approximately 28.9% of spread bettors are profitable, or about 94,593 traders.
This figure aligns reasonably well with the 90,000 professional spread bettors who consistently profit from their trades. These are likely the traders who have refined their strategies over years of experience, use proper risk management tools, and leverage advanced techniques such as automated trading.This means that out of approximately 327,273 active spread bettors, around 90,000 are profitable.
Conclusion: The Hard Truth About Spread Betting Success
While the statistics show that spread betting can be profitable for some, the majority of traders face substantial losses. With 72.5% of traders losing money on average, only a small percentage consistently generate profits. For those considering spread betting, it’s crucial to understand the risks involved, develop a sound trading strategy, and select a reputable, FCA-regulated broker.
Moreover, using risk management tools, starting with a demo account, and focusing on education can significantly improve a trader’s chances of success. For those looking to trade with a reputable broker, SpreadEx, ActivTrades, and Pepperstone offer platforms with a variety of risk management tools that can help tilt the odds in your favour.
Paul Williams is an experienced Senior Analyst working with experience working for HSBC in their derivatives trading division for 5+ years. He is a regular contributor to major financial news publications and has experience both trading his own capital and managed capital. He is currently the Chief Analyst and Reviewer for Spreadbet.AI.
